Chapter 14 Section 3

Question 1

prorating

Answer 1

-the division of items that cover time periods during which both the seller and the buyer own the property

Question 2

365-day method of proration

Answer 2

-real estate taxes, which are paid annually, are divided by 365 days to obtain the daily cost. this amount is multiplied by the number of days that are prorated to determine the amount of the proration
-rent and mortgage are divided by the number of days in the month of closing and multiplied by the number of days which are being prorated

Question 3

12 month/30-day method of proration

Answer 3

-assumes that a year consists of 12 months with 30 days each
-amount of annual real estate taxes is divided by 12 months and then 30 to reveal daily cost
-to calculate the amount prorated, the monthly average cost is multiplied by the number of full months of ownership, and the daily average cost is multiplied by the number of days of ownership in the month of closing

Question 4

items subject to proration

Answer 4

-mortgage interest when a loan is being assumed, real estate taxes, insurance, rent