Contracts
In a real estate transaction, 'prorations' are adjustments made to ensure that:
AThe broker's commission is shared properly
BExpenses are divided fairly between buyer and seller based on the closing date✓ Correct
CAll closing costs are paid by the buyer
DThe lender receives proper payment
Explanation
Prorations at closing divide ongoing expenses (property taxes, HOA dues, rent) between buyer and seller based on their respective periods of ownership relative to the closing date.
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Key Terms to Know
Closing Costs
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
ProrationThe division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
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