Proration

Key Takeaways

• Proration divides an expense that spans a period between seller and buyer according to how many days of that period each one owns the property.
• Every proration needs two conventions stated before the arithmetic starts: the day count (a 360-day year of 30-day months, or a 365-day year of actual days) and who is charged for the day of closing.
• In Washington teaching practice the buyer is charged for the day of closing, so the seller's day count stops the day before closing.
• A prorated item lands on the settlement statement as a debit to one party and an equal credit to the other, never as a separate check between buyer and seller.

What It Means

Proration splits a shared expense between seller and buyer according to how much of the period each one owns the property. Property taxes, homeowner association dues, an assumed hazard insurance policy, and interest on an assumed loan are the usual candidates, because each one covers a stretch of time that the Closing Date cuts in half.

The mechanics are the same every time. Find the total for the period. Divide it by the number of days in the period to get a daily rate. Count the days each party owns the property. Multiply. Two conventions have to be settled first, and the arithmetic is wrong if they are not. The first is the day count: a 360-day year with twelve 30-day months, which makes the daily rate easy, or a 365-day year with the actual days in each month, which is more precise. The second is who is charged for the day of closing.

The result never moves as cash between the parties. The closing agent posts it inside the settlement statement, so it reaches the buyer through cash to close and the seller through Net Proceeds.

How It Works in Washington

In Washington, the property tax calendar is what makes tax proration predictable. RCW 84.60.020 provides that taxes assessed upon real property "shall be a lien thereon from and including the first day of January in the year in which they are levied until the same are paid," so the tax period is the calendar year. RCW 84.56.020 then makes the whole amount due "on or before the 30th day of April," with the option to pay half by April 30 and the remainder "on or before the following 31st day of October" when the total is $50 or more.

Those two dates decide the direction of the credit. A seller closing in the spring who has not yet paid anything owes the buyer for the days already used. A seller closing in the fall who paid the first half in April has usually paid past the closing date and is still short of the second half. The licensed Escrow agent computes the figures under the closing instructions the parties give, which is the role chapter 18.44 RCW assigns. One Washington item is never prorated: the real estate excise tax under RCW 82.45.080 "is the obligation of the seller" on the sale itself, not a periodic expense that spans a year.

Example

Rosa sells a house in Spokane to Tim, closing Friday, September 18, 2026. The 2026 property taxes are $4,380 for the year. Rosa paid the first half of $2,190 on April 30. The parties use a 365-day year with actual days, and the buyer is charged for the day of closing.

Daily rate: $4,380 divided by 365 equals $12.00 per day.

Rosa's days: January 1 through September 17, which is 260 days. 260 times $12.00 equals $3,120, Rosa's share of the year.

Tim's days: 365 minus 260 equals 105 days. 105 times $12.00 equals $1,260, Tim's share.

Rosa owes $3,120 and has paid $2,190, so she is short $3,120 minus $2,190 equals $930. Escrow debits Rosa $930 and credits Tim $930.

Check it from Tim's side. Tim will pay the full second half of $2,190 on October 31, but his own share of the year is only $1,260. He is overpaying by $2,190 minus $1,260, which is the same $930 the credit gives him.

Common Mistakes and Exam Traps

• Read the day-count convention before dividing. The same closing produces different answers on a 360-day year than on a 365-day year, and the question always tells you which to use.
• Get the direction right. An expense the seller already paid produces a credit to the seller, while an unpaid bill the buyer will pay produces a credit to the buyer. Reversing the two is the most common error on the exam.
• Confirm who is charged for the closing day. Charging the buyer for it, as Washington teaching practice does, shortens the seller's count by one day and changes the answer.
• The real estate excise tax is not prorated. Under RCW 82.45.080 it is the seller's obligation on the sale itself, not an expense that spans the calendar year.