Escrow & Title
What does 'proration' mean in a Nevada real estate closing and provide an example?
ACalculating the agent's commission as a percentage of sale price
BDividing periodic charges (property taxes, HOA dues, rents) between buyer and seller based on the closing date so each party pays only their portion✓ Correct
CAdjusting the purchase price for inflation since the listing date
DThe title company's fee for conducting the closing
Explanation
Proration allocates ongoing expenses or income between buyer and seller based on who owned the property on each day. Example: Annual property taxes of $3,650 ($10/day) on a property that closes on March 31.
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Key Terms to Know
Proration
The division of ongoing property expenses (taxes, HOA dues, rents) between buyer and seller at closing based on their respective days of ownership.
Closing CostsFees 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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Title InsuranceInsurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Math Concepts
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