Prorations
The split at closing of shared costs like property taxes, HOA dues, and rent between buyer and seller, based on the closing date. Nobody pays for days they didn't own.
Your Room opens on going under contract and closing, with the offer and everything before it already ticked.
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See how it worksWhere this comes up in a sale, and what follows
- Settle repairs (comes before)
Part 1 of 4
Why a seller cares
Property taxes, HOA dues and sometimes utilities are split at closing by the day. Depending on how your state bills taxes, the proration can be a credit to you or a charge, and it is usually a real number.
Part 2 of 4
A simple example
Annual taxes of $3,650, or $10 a day. You close on day 200 of the year in a state that bills in arrears.
| How the state bills taxes | What the proration does on day 200 |
|---|---|
| In arrears, paid next year | You credit the buyer about $2,000 for the days you owned |
| In advance, already paid this year | The buyer credits you for the days they will own |
| HOA dues paid for the month | The buyer reimburses you for the rest of the month |
Nobody pays for days they did not own. Which way the money goes depends on who paid the bill already.
Part 3 of 4
What people get wrong
That the tax proration is a fee. It is the part of the year's taxes that belongs to you, settled once instead of later.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines prorations in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.