Proration
National Real Estate Exam glossary · Math Calculations
Definition
The fair division of ongoing property expenses or income—taxes, insurance, rent, interest—between buyer and seller as of the closing date, so each pays only for the period of ownership. Daily amounts are found by dividing the annual figure by 360 (a banker's year) or 365, as the contract or local custom specifies.
Proration in plain English
When a house sells partway through the year, some bills (like property taxes or rent) cover time that belongs partly to the seller and partly to the buyer. Proration is the fair math that splits those costs so each person only pays for the days they actually owned the place. It's like splitting a monthly streaming bill with a roommate who moves in on the 10th — you figure out the daily cost and each covers your own days. To get that daily amount, you divide the yearly figure by 360 (a "banker's year") or 365, depending on what the contract or local custom uses.
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