17.4 PRORATIONS AT CLOSING

Proration Rules

1. 30 day Standard Month
2. 360 day standard Year
3. Seller is in possession of the property on the day of closing

1. In preparing a statement for a closing to be held August 14, a real estate broker determines that the annual real property taxes in the amount of $360 have not been paid. What will the broker put in the buyer’s statement as her entry for real property taxes?

Solution Step 1 — Determine the monthly Tax Amount
Calculation – $360/12 = $30 per month
Solution Step 2 — Determine the Daily Tax Amount
Calculation – $30/30 = $1 per day
Solution Step 3 = Determine the Total Monthly Taxes Owed
Calculation – $30 X 7 (through July) = $210
Solution Step 4 — Determine the Total Monthly Taxes for the month of closing
Calculation – $1 x 14 = $14
Solution Step 5 — Add the total Tax Amount
Calculation – $210 + $14 = $224
Answer: $224 buyer credit (this is the seller’s share of the real property taxes to cover the 7 months and 14 days of the tax year during which he owned the property).