Pro-Ration

Pro-rationing relates to any cost associated with home-ownership that must be divided due to the ownership of the home changing in midyear. The best example is property tax, which is assessed on a yearly basis. For example, assume the property tax on the property is $1,200.00, and the tax year runs from Jan. 1, to Dec. 31. If the sale closes (and ownership transfers) on July 1 (mid year), and the property tax bill will be assessed against the new owner at year's end, then $600 should be credited by Seller to Buyer to represent that Buyer and Seller each lived in the house for one-half of the year, and are therefore paying proportionate, or "prorated" taxes.

Any other items that lend themselves to pro-rationing should be handled in like manner. The Escrow Agent will calculate and/or check prorated figures.