Question

Annual Pre-Paid Property Taxes ÷ 365 x Days Buyer Will Live At Property Including Closing Date

I.e. $1425 ÷ 365 x 109 = $425.55
Since the seller has paid taxes for the year, the seller receives a credit of $425.55 from the buyer on closing."
A) $425.55
B) $1425
C) $109
D) $365

Answer 1

The calculation provided in the question relates to prorating annual prepaid property taxes in a real estate transaction. The correct amount the seller receives as a credit from the buyer is $425.55, which is based on the buyer's occupancy period of the property for that tax year.

Step-by-step explanation:

The student's question pertains to prorating property taxes during a real estate transaction. Prorating means adjusting the amount owed based on the proportion of the year the buyer will own the property. The calculation involves taking the annual prepaid property taxes, dividing by the number of days in the year (365), and then multiplying by the number of days the buyer will be living on the property. Therefore, if the annual prepaid property taxes are $1,425, we divide by 365 days and multiply by 109 days (days buyer will live at the property), resulting in $425.55. This value represents the credit that the seller receives from the buyer during the closing process.