closing

proration

Proration is the division of ongoing property expenses and income between buyer and seller at closing, so each pays for the time they own the property. Commonly prorated items include property taxes, rents, HOA dues, and interest on assumed loans. Items paid in advance are credited to the seller, and items owed but unpaid are credited to the buyer. Who pays for the closing day itself varies by state or contract.

Exam tip: Prepaid by seller means credit seller, debit buyer; accrued and unpaid means debit seller, credit buyer. Check whether the problem uses a 360-day or 365-day year.
Example: A seller who paid the full $3,600 annual tax closes after owning the home for 9 months; the buyer reimburses the seller $900 for the remaining 3 months.

1. The seller prepaid $4,320 in property taxes for the calendar year. Closing is April 20, and the seller owns the day of closing. Using a 360-day year (30-day months), what is the proration?

Answer & explanation

Answer: B. Daily = $4,320 / 360 = $12. Seller owned Jan 1-Apr 20 = 3 months + 20 days = 110 days, so the buyer owes for 360 - 110 = 250 days. 250 x $12 = $3,000, credited to the seller (who prepaid) and debited to the buyer.

Related terms & state variants

30-day month method 365-day method accrued expense prepaid expense proration calculation

Sources

Source verification pending. Confirm current requirements with your state regulator.

Last verified: 2026-10-23