馃攳
Real Estate Math Video #6a - Prorate Real Estate Taxes (360/30 Day Method) | Real Estate Exam Prep - YouTube
Channel: The Real Estate Classroom
[2]
[Music]
[10]
there's going to be a really good chance
[13]
that there's going to be a question on
[14]
your real estate licensing exam over
[16]
prorating real estate taxes in today's
[20]
video I'm going to show you how to
[21]
prorate real estate taxes using the 360
[25]
or the 30-day calculation method in
[30]
today's video I'm going to show you how
[31]
to calculate or prorate real estate
[35]
property taxes using the 360 or the
[39]
30-day year which is different than
[43]
another way that you can calculate
[45]
property taxes using the 365 day method
[50]
now I did a video already on how to
[52]
calculate property taxes using the 365
[55]
day year there's a link right up here in
[58]
the upper right hand corner of your
[59]
screen click on that little I if you
[61]
want to watch that one before you watch
[63]
this one all right so let's jump right
[66]
into today's problem Tim purchase 1 2 3
[69]
Main Street annual taxes on the property
[73]
is $1,600 for the calendar year and the
[77]
seller has free paid the taxes through
[80]
December 31st
[81]
if closing is September 17th what amount
[85]
of taxes will be prorated at closing
[87]
proration is based on a 360 day 30-day
[92]
year the day of closing is the
[96]
responsibility of the seller ok we have
[99]
all the information that we need to make
[102]
our proration calculations now anytime
[105]
you're doing proration
[106]
as I have said in the other videos
[108]
dealing with proration x' there are some
[111]
things some prerequisites that we have
[113]
to go through number one are we using a
[117]
360 day year are we using a 365 day year
[122]
for our method of calculation and we
[125]
know from our problem that we're using
[127]
the 360 or the 30 day method and also
[132]
that simply means is no matter how many
[135]
days are in the month we are going to
[137]
base any calculations on 32
[139]
so January it's gonna be based on 30
[142]
days February based on 30 days that's
[144]
the difference number two are the taxes
[148]
paid in advance or in arrears and in
[150]
this case the problem told us that the
[152]
taxes have been paid in advance by the
[155]
seller who is responsible for the day of
[158]
closing and the problem told us the
[160]
seller is responsible for the day of
[162]
closing and ultimately anytime you're
[165]
dealing with proration zwip the question
[168]
ultimately wants an answer to is is it
[171]
going to be a buyer cost or a buyer
[174]
credit a seller cost and a saw reseller
[177]
credit and how much all right so let's
[180]
get to today's video we know
[182]
automatically that it's a 360 day
[186]
process for calculation we also know
[188]
that the 17th is the closing the 17th of
[192]
September we also know that the seller
[194]
has paid the entire month through the
[196]
December 31st so that tells us right
[199]
away based on the information that we
[201]
have that the buyer is gonna have to
[205]
that's going to be a cost or a debit to
[208]
the buyer because the buyer is gonna
[210]
have to reimburse the seller for these
[213]
three and a half months that were
[215]
prepaid all right so the buyer it's
[218]
going to be a cost and the seller is
[219]
going to get a credit at closing we also
[223]
know that annual taxes are sixteen
[226]
hundred dollars or one thousand six
[228]
hundred dollars per calendar year so
[231]
that's what gonna that's gonna be our
[233]
baseline but here's something that's a
[235]
little bit different when calculating
[237]
use of that using the 360 method versus
[240]
the 365 we actually have to break down
[243]
the months then the per diem amount and
[248]
I'll explain why that matters in just a
[249]
minute now so we're gonna take because
[252]
we got to break down these months here
[254]
first right so sixteen hundred divided
[258]
by 12 because they're there are twelve
[260]
months in the year that gives us a
[263]
monthly rate of $133.33 so going to our
[268]
calendar here we know that October it's
[271]
going to be 133
[272]
3:33 we know November is 13333
[277]
lots of threes there and we know that
[279]
December is 13333 all right we also know
[285]
that closing is the 17th of September so
[287]
we're gonna have to break that down into
[289]
per diem
[290]
we know that the closings on the 17th so
[293]
there's going to be a certain number of
[294]
days that the buyer is gonna have to
[296]
reimburse the seller for but we can't do
[299]
it by just using the monthly rate
[302]
because we would overpay the seller so
[304]
we have to break this down into per diem
[306]
so we're gonna take a hundred and thirty
[308]
three dollars and 33 cents and we're
[311]
gonna divide it by thirty which
[313]
represents thirty days in our month and
[315]
when we do that that gives us a total
[317]
amount of four dollars and forty four
[321]
cents four dollars and forty four cents
[324]
now how many days are there in September
[329]
that we're gonna multiply by that for
[331]
forty four well again just like I
[334]
mentioned in a different video we got to
[335]
use our fingers here all right so the
[337]
seventeenth we know by the problem is
[339]
going to be the responsibility of the
[341]
seller the seller has to pay it so the
[344]
buyer is not going to reimburse them for
[346]
the day of closing so that means it's
[349]
the 18th 19 20 21 22 23 24 25 26 27 28
[355]
29 30 13 days 13 days all right so that
[364]
the buyer is responsible for 13 days in
[366]
September so we're gonna take four
[370]
dollars and 44 cents and we're gonna
[373]
multiply it by 13 and when we do that
[375]
that's going to give us a total of 57
[378]
dollars and 72 cents 57 72 so here's
[385]
what we're gonna do we're gonna take to
[388]
find out the total amount that sold owed
[390]
we're going to take one hundred and
[394]
thirty three dollars and 33 cents which
[396]
is our monthly rate and multiply it by
[399]
three full months which is October
[401]
November December and that should give
[405]
us a toe
[406]
of $399.99 and then we're going to add
[416]
in our month of September of 57 dollars
[420]
and 72 cents and when we add all of this
[424]
up that should give us a grand total of
[426]
four hundred and fifty seven dollars and
[428]
seventy one cents I'm pretty sure I did
[431]
the math right there so so what's going
[434]
to happen or the the correct answer to
[436]
this question is the buyer the cost to
[440]
the buyer is 457 450 771 and the credit
[447]
to the seller is four hundred and
[449]
fifty-seven dollars and seventy one
[451]
cents so that would be the correct
[454]
answer okay one thing I want to point
[457]
out here anytime you are doing a
[458]
proration problem involving rents or
[461]
taxes a lot of times you can eliminate a
[464]
couple potential answers right away
[468]
notice that these two numeric values are
[471]
the same so in this case the buyer cost
[475]
was 450 771 and the seller credit was
[479]
450 771 it's the same numeric value I
[484]
see this all the time from students that
[487]
call me about their tests and one of the
[489]
options they'll say is let's say option
[491]
C was a a seller debit of $800 and a
[497]
buyer credit of $900
[501]
notice the two numeric values are
[503]
different when you're taking your
[506]
real-estate exam if you see this on a
[509]
proration question involving taxes or
[512]
rent you know automatically that C is
[515]
not even a viable option for the correct
[518]
answer you can eliminate that one right
[520]
away so obviously it narrows your chance
[523]
of getting the correct answer so what
[525]
we're looking for is matching numeric
[527]
values here there you have it that is
[530]
prorating taxes if you want to check out
[533]
another video on prorating rent right
[535]
here is a link to another video and if
[537]
you have not subscribed to this channel
[538]
yet
[539]
click the little circle right here and
[541]
that'll get you all set up that's all I
[543]
got for today's video we'll see you in a
[546]
future video
Most Recent Videos:
You can go back to the homepage right here: Homepage