### What is proration in the context of real estate? - [ ] The act of determining the market value of a property - [x] The act of splitting costs proportionally between buyer and seller - [ ] Setting the closing date for a property transaction - [ ] Calculating the total cost of a mortgage > **Explanation:** Proration in real estate refers to the proportional division of certain costs, such as property taxes and rents, between the buyer and seller. This is usually settled at closing to ensure that each party pays their fair share based on the time they owned the property. ### What kind of expenses are commonly prorated during a real estate transaction? - [ ] Home renovation costs - [x] Property taxes - [ ] Loan origination fees - [ ] Homeowner's insurance premiums > **Explanation:** Property taxes are a common expense that is prorated between buyer and seller during a real estate transaction. This ensures that each party pays their share of taxes based on the amount of time they owned the property within the tax period. ### When is proration typically settled in a real estate transaction? - [x] At closing - [ ] At the time of home inspection - [ ] When the purchase offer is made - [ ] After escrow is completed > **Explanation:** Proration is typically settled at closing, which is the final step in a real estate transaction when ownership is transferred and all outstanding costs are accounted for. ### In a real estate transaction, if the closing date is October 1 and the annual property taxes are $12,000, how much is the seller responsible for? - [ ] $3,000 - [ ] $6,000 - [x] $9,000 - [ ] $12,000 > **Explanation:** The seller is responsible for 9/12ths (or 3/4) of the property taxes because the closing date is October 1. This is calculated as (9/12) * $12,000 = $9,000. ### How is proration usually expressed if the seller has already paid the property taxes for the full year? - [ ] As a debit to the buyer - [x] As a credit to the seller - [ ] As an additional closing cost - [ ] As a refund from the escrow company > **Explanation:** If the seller has already paid the property taxes for the full year, proration is typically expressed as a credit to the seller during closing. The buyer reimburses the seller for their share of the taxes based on the time they will own the property. ### What does proration help ensure in real estate transactions? - [ ] That the mortgage rate is locked - [ ] That the property is appraised correctly - [ ] That the real estate agent's commission is paid - [x] That costs are fairly distributed between buyer and seller > **Explanation:** Proration ensures that costs such as property taxes and rents are fairly distributed between the buyer and seller based on the time each party owns the property. ### Aside from property taxes, what other expense might be prorated when purchasing a rental property? - [ ] Utility bills - [x] Rents due - [ ] Maintenance costs - [ ] Insurance premiums > **Explanation:** When purchasing a rental property, rents that are due can be prorated between the buyer and seller to reflect the income each party should receive based on the closing date. ### What does the term proration originate from? - [ ] Old French term “proration” - [x] Latin term “pro-rata” - [ ] Greek term “prorainte” - [ ] Old English term “proratin” > **Explanation:** The term proration originates from the Latin term "pro-rata," which means to divide proportionally. This concept is applied in real estate to fairly split expenses between parties. ### What would happen if proration wasn’t settled at closing in real estate transactions? - [ ] The buyer might owe additional property taxes - [ ] The mortgage might not be approved - [x] There could be an unfair distribution of costs - [ ] The property might not appraise correctly > **Explanation:** If proration wasn’t settled at closing, it could lead to an unfair distribution of costs like property taxes and rents, with one party paying more than their fair share. ### Which party typically reimburses the other in proration when the property taxes have already been paid for the full year? - [x] Buyer reimburses the seller - [ ] Seller reimburses the buyer - [ ] Lender reimburses the seller - [ ] Escrow company reimburses the buyer > **Explanation:** When the property taxes have already been paid for the full year, the buyer typically reimburses the seller for the portion of taxes corresponding to the period after the closing date.