Self Help Documentation

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Prorations

The fair-share buyer-seller splitting of expenses that extend over closing.

Two types of payments and costs that are allocated between the buyer and seller at closing are accrued items and prepaid items:

  1. An accrued expense is an accounting expense recognized in the books before it is paid for.
  2. prepaid item is an accounting expense recognized in the books after it is paid for.

credit 

is an amount owed to the buyer or seller or something for which they’ve already paid.

A debit

 is something that the buyer or seller owes. 

Mortgage Payoff

credit to the seller – OK.  We paid it off! 

debit to the buyer – The buyer has to pay for the house.

Down Payment

a credit to the buyer

Property Taxes

Before the closing date, paying the tax on the property is the seller’s responsibility; on and after the closing date, it’s the buyer’s responsibility as the new owner. Because state and local property tax requirements vary across the United States, including the tax due dates, 

The seller pays taxes up to the closing date.  

If the Seller Paid Taxes Already:

It is a credit for the seller.

They get a refund. 

They only pay for the days they owned the property.

The buyer pays taxes from the day after closing until the rest of the year.

It is a debit for the buyer

They only pay for the days they owned the property.

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