Prorations in closing refer to what?

• A. Allocation of property taxes and rents between buyer and seller at closing
• B. A payment to the seller's agent
• C. A penalty for late closing
• D. A requirement to have a property survey

Answer: (B)

Prorations in closing describe how ongoing costs are divided between the buyer and seller at the moment of transfer. The idea is to allocate expenses that accrue over time—such as property taxes, rents, HOA dues, and prepaid interest—so each party pays for the portion of those costs that corresponds to their period of ownership. For example, if the closing occurs mid-year, the seller might owe the buyer for taxes or dues that accrue after the closing date, or the buyer might owe for the portion that accrues before closing, with an adjustment at settlement. This ensures the financial settlement is fair for both sides. The option describing a payment to the seller's agent reflects a broker’s commission, not a prorated item, and is handled separately. Other choices about penalties or surveys aren’t prorations either.