Annual property taxes of $7,200 have been PREPAID by the seller for the entire year. The closing is July 1 using a 360-day year. How much does the buyer owe the seller for the prepaid tax proration?
Correct Answer
B) $3,600
Step 1: Daily rate = $7,200 ÷ 360 = $20.00. Step 2: Buyer owns the remaining 180 days (July 1 through Dec 31). Step 3: Buyer owes seller = 180 × $20 = $3,600.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Loan qualification math involves calculating the debt-to-income ratios that lenders use to determine whether a borrower qualifies for a mortgage. The two primary ratios are the front-end (housing expense) ratio and the back-end (total debt) ratio.
Monthly interest is the portion of the total annual interest that is paid or accrued each month.
Net operating income (NOI) is the annual income generated by an income-producing property after deducting operating expenses, but before deducting mortgage payments, income taxes, and depreciation.
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