Proration


Proration, which comes from the Latin pro-rata, is the act of splitting something proportionally. In real estate, the term proration is most commonly used in determining how the property tax should be paid between buyer and seller. For example, if the closing for a house is to occur on October 1, it would be common for the seller to be responsible for 9/12ths of the property tax and the buyer to be responsible for 3/12ths. The payment of property tax between buyer and seller using proration is typically settled at closing, which is usually expressed as a credit to the seller, especially if they have already paid the property taxes for the full year. In the context of the purchase of investment real estate, proration can also refer to proportionally splitting rents that are due between the buyer and seller of the property.