A buyer is closing on January 15. The annual property taxes of $4,380 were prepaid by the seller on January 1 for the entire year. The buyer must reimburse the seller for the seller's prepaid taxes from January 15 through December 31. Using a 365-day year, how much does the buyer owe the seller for the tax proration?
Correct Answer
A) $4,212
The seller prepaid for the full year. The seller owns through January 14 (14 days). The buyer owes for January 15 through December 31 = 365 - 14 = 351 days. Daily rate = $4,380 / 365 = $12/day. Buyer owes = 351 × $12 = $4,212.
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Related Topics & Key Terms
Key Terms:
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A trust account, also called an escrow account, is a separate bank account maintained by a broker to hold funds belonging to others, such as earnest money deposits, security deposits, or other client funds.
Advertising regulations govern how real estate licensees may market properties and services, requiring truthful, non-deceptive advertising that includes proper identification of the brokerage.
Antitrust violations in real estate occur when competing brokerages or agents engage in practices that restrain trade, reduce competition, or harm consumers through collusion. These violations are governed by the Sherman Antitrust Act and can result in severe penalties.
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