Prorations at closing divide ongoing expenses like property taxes, HOA dues, and utilities between the seller and buyer based on the closing date. The seller pays for the portion of the year they owned the home, and the buyer pays from closing day forward.
Prorations ensure each party pays only for the time they actually own the property.
Property Tax Prorations
Property taxes in Texas are paid in arrears. At closing, the seller credits the buyer for the portion of taxes the seller owes from January 1 through the closing date. If the seller has already paid taxes for the year, the buyer reimburses the seller for the portion after closing. The title company calculates the exact proration based on the most recent tax assessment and the closing date.
HOA Dues Prorations
If the property is part of a homeowners association, HOA dues are prorated at closing. If the seller paid the full quarter or year in advance, the buyer reimburses the seller for the portion after closing. If dues are unpaid, the seller pays their share through closing. The title company will request a estoppel letter from the HOA confirming the current balance and any assessments.
Utility Prorations
Utility prorations are less common since most utilities are billed monthly and sellers typically cancel their service on closing day. However, if utilities are included in HOA dues or if there is a shared well or septic system, the costs may be prorated. The seller should arrange final meter readings and transfer service to the buyer on closing day.
The closing disclosure will show all prorations clearly. As your agent, I review the disclosure with you to make sure everything is calculated correctly before you sign.
