Real Estate Calculations and Prorations
Proration mechanics
Colorado practice prorates on a 365-day year. The seller typically pays recurring items through the day before closing; the buyer pays from closing day. Because Colorado property taxes are paid in arrears - the bill for a year is issued and paid the following year, in halves due late February and mid-June - the seller at closing normally owes the buyer a credit for accrued taxes.
Arithmetic you must own
- Commission: price × rate; splits follow the brokerage agreement.
- LTV; points (1% of loan); monthly interest = loan × rate ÷ 12.
- Area: 1 acre = 43,560 square feet.
- Property tax: actual value × assessment rate × mill levy ÷ 1,000.
- Documentary fee: $0.01 per $100 of consideration.
Traps: using 360 days or twelve equal 30-day months; prorating taxes as though prepaid; charging the buyer the day of closing twice; dividing the mill levy by 100 instead of 1,000.
Worked example: annual taxes $3,650; closing June 30; 365-day year. Daily rate = $10.00. Days from January 1 through June 30 = 31 + 28 + 31 + 30 + 31 + 30 = 181. Seller's share = 181 × $10 = $1,810, credited to the buyer at closing. Had the seller already paid the first half of $1,825, the proration reverses and the buyer credits the seller instead.