Why agents care
Prorations are one of the main reasons a seller's final proceeds differ from a net sheet estimate. Mentioning them upfront prevents a 'why is my check smaller?' call after closing.
Glossary term
Proration
Proration splits recurring property costs, such as property taxes, HOA dues and sometimes utilities or rents, between seller and buyer based on the closing date. Whether taxes are paid in advance or in arrears in a given state determines who credits whom.
Example
Example: if annual taxes of $4,680 are paid in arrears and closing is on June 30, the seller may credit the buyer about $2,340 for the half year the seller owned the home.
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Questions by topic
Proration: common questions
Are prorations a cost or a credit?
Either, depending on who has already paid. Paid in arrears usually means a seller credit to the buyer.
Why aren't prorations in the net sheet?
They depend on the closing date and local tax timing, so sellers add an estimate to other costs.
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