Humber/Ontario Real Estate Course 4 Exam Practice

If the seller has paid the current year's property taxes of $2,400 and the closing date is October 1, what is the correct adjustment on the statement?

1. Buyer; $598.36

2. Buyer; $1,800.55

3. Seller; $598.36

4. Seller; $604.93

5. Buyer; $1,795.07

6. Seller; $1,795.07

The correct answer is: Seller; $604.93

In this scenario, since the seller has paid the current year's property taxes of $2,400 and the closing date is October 1, the seller would have owned the property for 274 days of the year (January 1 to October 1 inclusive). To calculate the accurate adjustment, you would divide the total annual property tax by 365 days (which means $2,400 divided by 365), the daily rate at which the seller pays. After finding the daily rate, you would multiply this by the number of days the seller has owned the property during the year to get the prorated amount they should have paid by closing date. Therefore, the correct adjustment on the statement that the seller should receive as a credit at closing would be $604.93, making option D the correct answer.