Proration is the process of fairly dividing certain property-related expenses between the buyer and seller based on the closing date. The principle is simple: the seller should pay their share of expenses for the period they owned the property, and the buyer should pay their share from the closing date forward. Prorations ensure that neither party overpays or underpays for shared expenses, and they are calculated to the day on the closing disclosure.
The most commonly prorated items include: property taxes (the largest proration, often thousands of dollars), HOA dues (monthly or quarterly assessments), prepaid rent (if the property has tenants), and occasionally utilities (in some markets). Each item is calculated by determining the daily cost (annual amount ÷ 365 days) and then multiplying by the number of days each party is responsible for.
Property tax prorations can be complex because taxes are often paid in arrears — meaning the tax bill covers a period that has already passed. For example, in Florida, property taxes for the calendar year are due by March 31 of the following year. If you close on September 15, the seller owes taxes for January 1 through September 14 (257 days), but the actual tax bill won't be issued until November. The proration is calculated based on the most recent available tax bill, with any adjustment handled after the actual bill arrives.
Prorations can result in either a credit to the buyer or a credit to the seller. If the seller has already paid the full year's property taxes and closing occurs mid-year, the buyer credits the seller for the unused portion — this appears as a charge to the buyer and a credit to the seller on the closing disclosure. Conversely, if taxes are unpaid, the seller's share is deducted from their proceeds (a debit to the seller and a credit to the buyer).
Accurate prorations are essential for a fair closing. At Beycome Title, we calculate all prorations to the exact day based on verified tax amounts and assessment schedules. We verify HOA balances through the estoppel letter and tax amounts directly with the tax collector's office. Both parties receive a clear accounting of every proration on the closing disclosure. Get your free closing estimate.