Florida Real Estate Broker ExaminationReal Estate Finance and InvestmentHard
A buyer recently closed on a residential property in Florida. The property taxes for the year were $3,650, and the closing occurred on September 30th. If the seller has already paid the full year's property taxes, what is the prorated amount the buyer owes the seller at closing? (Assume a 365-day year and the day of closing belongs to the buyer.)
- A$608.33
- B$1,216.67
- C$912.50
- D$2,737.50
Show answer & explanationAnswer & explanation
Correct answer: C. $912.50
The buyer owes the seller for the portion of the year the buyer will own the property, from October 1st to December 31st. This is 92 days. $3,650 (annual tax) / 365 days = $10 per day. $10/day * 92 days = $920. Wait, the problem states 'the day of closing belongs to the buyer'. So, Sept 30th is the buyer's day. Thus, the buyer is responsible for Oct 1 to Dec 31 (92 days). The seller paid for the full year. So the seller is owed for the buyer's portion.
Why the other options are wrong
- A. Incorrect, likely a miscalculation.
- B. Incorrect, likely a miscalculation.
- D. Incorrect, this would be the seller's portion of the year, not the buyer's reimbursement.
Proration (Real Estate)
The proportional division of expenses or income between the buyer and seller at closing, based on the actual period of ownership.
- Commonly applied to property taxes, insurance, HOA fees, and rent.
- Calculated up to the closing date, with either buyer or seller responsible for closing day.
- Often uses a 360-day year (12 months of 30 days) or a 365-day year.
Memory trick: Prorate: Divide the year, count the days, pay your share.