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Which of the following items would be prorated at closing with the credit going to the seller?

Rationale

Prepaid property taxes would be prorated at closing with the credit going to the seller.

Prepaid property taxes are expenses that the seller has already paid for the period that extends beyond the closing date. As such, these taxes are prorated to ensure the buyer only pays for the portion of the tax period they own the property, effectively crediting the seller for the amount already covered.

A (accrued interest on an assumed mortgage) YOUR ANSWER

Accrued interest on an assumed mortgage refers to the interest that has accumulated on a mortgage loan since the last payment was made. This interest is typically the buyer's responsibility at closing, as the buyer will assume the mortgage and continue making payments. Therefore, it does not result in a credit to the seller.

B (prepaid property taxes) CORRECT

As stated in the opening, prepaid property taxes are prorated at closing, with the seller receiving credit for the amount they have already paid that covers the period after the closing date. This ensures that the buyer is only responsible for taxes corresponding to their ownership of the property.

C (earnest money) YOUR ANSWER

Earnest money is a deposit made by the buyer to show their commitment to purchasing the property. This amount is typically credited toward the purchase price at closing rather than being prorated. Thus, it does not create a situation where a credit goes back to the seller.

D (unearned rent collected in advance) YOUR ANSWER

Unearned rent refers to rent payments received by the seller for a period that extends beyond the closing date. While this amount is considered during closing, it is generally credited to the buyer, as they will be receiving the benefit of the rent during their ownership. Therefore, it does not credit the seller.

Conclusion

At closing, prorating prepaid property taxes ensures that the seller is credited for the amount they have paid beyond the closing date, while the buyer only pays for the period they own the property. Other items like accrued interest, earnest money, and unearned rent do not involve similar prorations that would result in credits to the seller, underscoring the importance of understanding how different closing costs are handled in real estate transactions.

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