Florida Real Estate Sales Associate Examination Content OutlineReal Estate Closings and Post-ClosingMedium
A buyer is closing on a new home. The seller has pre-paid the annual property taxes of $3,650.00 for the current year. The closing date is October 15th, and the day of closing belongs to the buyer. Using the 365-day method, what is the seller's credit for property taxes at closing?
- A$843.84
- B$769.86
- C$834.25
- D$760.27
Show answer & explanationAnswer & explanation
Correct answer: B. $769.86
The seller is credited for the portion of the year they have paid taxes for, but will no longer own the property. From October 15th to December 31st, there are 78 days remaining in the year (17 days in Oct + 30 in Nov + 31 in Dec). The daily tax rate is $3,650 / 365 = $10.00. Therefore, the seller's credit is $10.00 * 78 days = $780.00.
Why the other options are wrong
- A. This calculation uses an incorrect daily rate or number of days.
- C. This calculation incorrectly prorates for 83 days.
- D. This calculation incorrectly uses 76 days remaining.
Property Tax Proration (365-day)
The process of dividing annual property taxes between a buyer and seller based on the closing date, assuming 365 days in a year.
- Seller typically pays for the period they owned the property.
- Buyer pays for the period they own the property.
- Credit/debit depends on who prepaid and for what period.
Memory trick: Divide the total, multiply by the part, for the fair closing start.