PSI Oklahoma Real Estate Practice Test

Which items are typically prorated between seller and buyer at closing?

1. Utility bills

2. Real Estate Taxes

3. Home warranty fees

4. Maintenance costs

The correct answer is: Real Estate Taxes

Real estate transactions often involve the proration of certain costs to ensure a fair division of expenses between the seller and the buyer at closing. One common item that is prorated is real estate taxes. This is because real estate taxes are typically assessed on an annual basis but are paid at specific intervals throughout the year. When the property is sold, it's essential to determine how much of the tax liability corresponds to the period that the seller owned the property versus how much corresponds to the period when the buyer will own it. This helps in accurately reflecting the use of the property in relation to tax obligations. Thus, at the closing, the seller typically pays taxes only for the time they owned the property up to the closing date, and the buyer is responsible for taxes from that date forward. Prorating real estate taxes ensures that neither party bears an unfair financial burden regarding property taxes for the time they did not own it. This practice is standard in real estate transactions and reflects an equitable approach to sharing property-related costs.