To calculate the prorations for interest and property taxes, we need to determine the number of days each party (the buyer and the seller) will own the property during the month of June.
There are a total of 30 days in June, so the seller will own the property for 15 days (from June 1 to June 15), and the buyer will own the property for 15 days (from June 16 to June 30).
Prorations for Interest:
The annual interest rate is 8%, which means the monthly interest rate is 8%/12 = 0.6667%. To calculate the daily interest rate, we divide the monthly interest rate by 30 (the number of days in June):
0.6667% / 30 = 0.0222%
The total interest owed for the full month is:
$168,745.60 x 0.6667% = $1,124.28
To calculate the prorated interest for the seller, we multiply the daily interest rate by the number of days the seller owned the property:
0.0222% x $168,745.60 x 15 = $559.02
To calculate the prorated interest for the buyer, we multiply the daily interest rate by the number of days the buyer will own the property:
0.0222% x $168,745.60 x 15 = $559.02
Therefore, the total prorations for interest are:
$559.02 for the seller and $559.02 for the buyer.
Prorations for Property Taxes:
To calculate the prorated property taxes, we divide the annual taxes by 365 (the number of days in a year) to get the daily tax rate:
$3,893.25 / 365 = $10.66 per day
To calculate the prorated property taxes for the seller, we multiply the daily tax rate by the number of days the seller owned the property:
$10.66 x 15 = $159.90
To calculate the prorated property taxes for the buyer, we multiply the daily tax rate by the number of days the buyer will own the property:
$10.66 x 15 = $159.90
Therefore, the total prorations for property taxes are:
$159.90 for the seller and $159.90 for the buyer.
The prorations will be subtracted from the seller's equity because they represent expenses incurred by the seller during the time they owned the property.