Prorations

If you pay your annual bill for homeowner's insurance or association dues and then sell your house, will this money be lost? Or, if you buy a home before the prior year's tax bill arrives, will you have to pay more than your share of the taxes? Don't worry. That's what proration is all about.

Usually, the following items are prorated to the day of closing: general taxes for the current year, water and sewer charges, and homeowner's association dues. When a buyer assumes the seller's current mortgage, interest charges are prorated. If the property is currently rented, the rent can be prorated.

The proration for property taxes is often based on the taxes for the calendar year immediately preceding closing. An alternative method of proration is to prorate taxes based on the most recent assessment and mill levy. By considering all the variables, I am able to enhance my seller or buyer's net proceeds by selecting the most appropriate proration method.

Services such as telephone, cable, water, trash removal, gas and electric services usually are not prorated. These utility companies generally arrange to discontinue service and/or transfer it to the buyer on a prearranged day.

Prorated items and the terms for proration are an integral part of the real estate sales contract. If you'd like a copy of a sales contract or have questions about any aspect of real estate, please call me.