Question

Please help

Linda and Ralph have signed a contract to purchase a home. The closing date is April 27, and the buyer owns the property on the day of closing The selling price of the

home is $782,500. Linda and Ralph obtained a fixed-rate mortgage from a bank for $685,000 at 7 35% interest. The seller has already paid $14,578.15 in property taxes

for the coming year. How much will Linda and Ralph owe in prorated expenses? (3 points)

Answer 1

Linda and Ralph will owe approximately $9,905.52 in prorated property taxes for the year, after calculating the daily property tax rate and multiplying it by the number of days they will own the home in the current tax year.

Step-by-step explanation:

Linda and Ralph need to determine their prorated expenses for the property taxes that have already been paid by the seller. To calculate this, we first need to determine the daily property tax rate, and then calculate how much they owe from the closing date, April 27, until the end of the year, December 31.

Calculating the Daily Property Tax Rate

The seller paid $14,578.15 for the full year. There are 365 days in a year, so the daily property tax rate is:

Daily rate = Total annual taxes / Number of days in the year

Daily rate = $14,578.15 / 365

Daily rate ≈ $39.94

Calculating Prorated Property Tax from Closing Date

Linda and Ralph will own the property starting on April 27, and there are 248 days remaining in the year from April 27 to December 31 (inclusive). Therefore, the prorated amount they owe for property taxes is:

Prorated taxes = Daily rate * Number of days from closing to end of year

Prorated taxes = $39.94 * 248

Prorated taxes ≈ $9,905.52

Linda and Ralph will owe approximately $9,905.52 in prorated property taxes for the year.