Methods and Allocation

To calculate these prorations accurately, the closing agent must first determine the specific time period involved. For taxes, this is an annual period; for rent or mortgage interest, it is a monthly period. A critical rule in most real estate contracts is determining who "owns" the day of closing. The standard custom is that the seller owns the day of closing; this means the seller is responsible for expenses and entitled to income for that specific day, and the buyer’s responsibility begins the day after. Finally, the math depends on the method chosen: the 360-day method (also called the statutory or banker's year) assumes every month has 30 days for simplicity, while the 365-day method uses the exact number of days in each specific month. The 365-day method is more accurate and is the one most commonly used for prorating daily property taxes.