Real Estate Proration Practice Questions and Answers

An annual property tax bill of $7,300 has not been paid. Closing is April 16, and the question assigns the closing day to the buyer. Who receives a credit, and for how much?

The calculation is only half the answer. Before dividing anything, identify who owes the expense for the period and who will actually pay the bill. In this example, the seller owes for the days before closing, but the buyer will pay the bill later. The seller therefore compensates the buyer through a closing adjustment.

This guide works through that reasoning for taxes, prepaid expenses, and rent. All transactions and amounts below are original practice examples, not actual closings or official exam questions. Day-count conventions are stated in each problem; they are not universal state rules.

Real estate proration: when does the buyer get a debit or credit?

Proration divides an expense or income item between parties for their respective periods. The CFPB's Closing Disclosure explainer distinguishes amounts the buyer reimburses because the seller prepaid an expense from amounts the seller owes but the buyer will pay later.

For these practice problems, a buyer debit increases the buyer's amount due at closing, while a buyer credit reduces it. A seller debit reduces the seller's proceeds, and a seller credit increases them. These are settlement-statement effects, not a general accounting definition for every debit and credit.

The third row matters. “Paid in advance” is not enough information to determine direction. Ask whether the seller paid an expense or received income.

Does the buyer or seller own the closing day?

Before solving, record four items: the period being allocated, the amount for that period, the counting convention, and which party receives the closing day.

A calendar-year problem using actual days needs the correct number of days in that year. A monthly problem might use the actual days in that month. A simplified 30-day-month problem uses the convention the question specifies. Do not combine a 360-day denominator with an actual-calendar numerator unless the question expressly requires that method.

If the closing-day assignment or counting method is missing and changes the answer, the problem is under-specified. Follow any applicable exam instructions supplied with the question; do not silently invent a statewide custom.

Property tax proration example: taxes paid in arrears

Given: Annual taxes are $7,300 for a non-leap calendar year. Use actual days and a 365-day year. Closing is April 16. The buyer owns the closing day and will pay the entire tax bill later. Assume the seller owned the property from January 1.

Seller's days are January 31, February 28, March 31, and April 1 through April 15:

31 + 28 + 31 + 15 = 105 days.

The daily expense is $7,300 / 365 = $20. The seller's share is 105 × $20 = $2,100. Enter a $2,100 seller debit and a $2,100 buyer credit.

Check the other side. The buyer's ownership period is 365 − 105 = 260 days, worth $5,200. When the buyer later pays $7,300, the $2,100 credit offsets the seller's share. The buyer's net expense is $5,200, exactly the buyer's allocated portion.

A $5,200 buyer credit would be the wrong allocation. That would reimburse the buyer for the buyer's own period rather than the seller's.

Prepaid HOA proration: buyer debit and seller credit

Given: The seller prepaid September association dues of $300. Use September's 30 actual days. Closing is September 11, assigned to the buyer. The dues are transferable, proratable, and cover the full month under the problem's contract.

The buyer's period is September 11 through September 30, inclusive: 20 days, not 19. The daily amount is $300 / 30 = $10. The buyer reimburses the seller $200.

The entries are a $200 buyer debit and a $200 seller credit. The seller keeps a $100 expense for September 1 through September 10. Together the two shares still total $300.

Notice what changed from the tax example: not the arithmetic, but who had already paid the expense.

Rent proration example: why the seller owes the buyer

Given: The seller collected the entire June rent of $2,100. Closing is June 16, assigned to the buyer. Use 30 actual days, assume rent is allocated by ownership day, and disregard security deposits and other lease adjustments.

The buyer owns June 16 through June 30: 15 days. Rent per day is $2,100 / 30 = $70. The buyer's share is $1,050.

Because the seller already holds that income, the seller gives up $1,050 at settlement. Record a seller debit and a buyer credit. Do not apply the prepaid-expense rule: rent collected is money received, not an expense paid.

A security deposit would need separate treatment under the applicable facts and rules. It is deliberately outside this calculation.

360-day vs. 365-day proration: use the stated convention

Given: Annual charges are $3,600. For this exercise only, use twelve 30-day months and a 360-day year. Closing is March 21, assigned to the buyer. The seller owes January 1 through March 20, and the charges remain unpaid for the buyer to pay later.

Seller's days under the stated convention are 30 + 30 + 20 = 80. The daily rate is $3,600 / 360 = $10. The seller's share is $800, entered as a seller debit and buyer credit.

Do not substitute the actual lengths of January and February. That would change the method halfway through the calculation.

Two checks that catch different mistakes

The allocation check: Seller's share plus buyer's share must equal the expense or income allocated for the whole period, allowing for final cent rounding.

The direction check: After the adjustment and the eventual bill payment, does each party bear its own expense or retain its own income? A mathematically correct amount can still be entered on the wrong side.

Keep intermediate precision until the last step. Where a problem specifies a rounding convention, use it. An unexplained one-day difference is not a rounding issue; revisit the closing-day assignment.

Real estate proration practice questions

A. Unpaid annual taxes are $4,380. Use 365 days. Closing is January 26, assigned to the buyer, who will later pay the entire bill. What is the seller's share and the adjustment?

B. A transferable annual expense of $1,460 has been prepaid by the seller. The question states that exactly 90 days of its 365-day coverage period belong to the buyer. What reimbursement is due?

C. The seller collected $1,550 rent for July. Use July's 31 actual days. Closing is July 21, assigned to the buyer. How much collected rent transfers to the buyer?

Proration answer key and calculations

A: $4,380 / 365 = $12 per day. January 1 through January 25 is 25 days. Seller debit and buyer credit: $300.

B: $1,460 / 365 = $4 per day; 90 × $4 = $360. Buyer debit and seller credit.

C: July 21 through July 31 is 11 days. $1,550 / 31 = $50 per day; 11 × $50 = $550. Seller debit and buyer credit.

Proration questions that change the answer

Are property taxes always a debit to the seller?

No. In an unpaid-tax problem, the seller's share is a seller debit and buyer credit because the buyer will pay that share later. If the seller has already paid an expense covering the buyer's ownership period, the buyer reimburses the seller instead. The CFPB Closing Disclosure explanation distinguishes items paid in advance from items unpaid by the seller. Do not decide the sign from the word "tax" alone.

Does a 360-day year mean every month has 30 days?

Only when the question specifies that convention. A denominator and a method for counting days are separate instructions. The worked 360-day example above explicitly supplies both. Mixing actual calendar days with a 30-day-month count can produce a plausible-looking answer under the wrong assumption.

What changes if the seller gets the closing day?

In the unpaid annual-tax example, the daily amount is $20. Moving one day from the buyer to the seller increases the seller's share by $20 and decreases the buyer's share by $20. The annual total does not change. This is a useful check without redoing every month.

Can I use these examples as a real closing statement?

No. These are original exam-practice problems with stated conventions, not a settlement calculation for a property. A real contract and settlement instructions determine the actual allocation. For an exam, write the assigned convention above your calculation rather than importing a custom from another state.

Keep proration separate from cash to close

One adjustment is not the buyer's complete closing payment. Purchase funds, borrowing, deposits, closing costs, and other permitted credits also affect that calculation. The CFPB separates these categories on its Closing Disclosure explanation. Our companion loan-to-value and cash-to-close guide follows the amounts through a complete fictional example.

For the wider financing context, review Real Estate Finance. Then use the general real estate practice test to practice identifying what each question actually asks. That test covers the broader exam; it is not a dedicated proration quiz.