Accrued/unpaid item (taxes in arrears): DEBIT seller, credit buyer
Before you read
Test yourself first: 5 questions
Question 1 of 5
In an agency relationship, the party who hires the agent and to whom fiduciary duties are owed is known as the:
Answer: B. The principal (also called the client) is the party who employs the agent; the agent owes fiduciary duties to this principal.
Question 2 of 5
Closing is August 20 (statutory 360-day year, 30-day months; seller owns closing day). Annual taxes of $3,240 are unpaid, due at year end. The proration entry is:
Answer: A. Daily rate: 3,240 ÷ 360 = $9. Seller owned Jan 1–Aug 20 = (7 × 30) + 20 = 230 days × $9 = $2,070. Taxes in ARREARS → seller owes: debit seller, credit buyer.
Question 3 of 5
Annual taxes are $2,400, paid in arrears, and closing is September 1. Using a 360-day banker's year (30-day months), the seller owes for 8 months. What is the seller's share owed to the buyer?
Answer: B. Monthly tax is $2,400 / 12 = $200; January through August is 8 months x $200 = $1,600 owed by the seller.
Question 4 of 5
A buyer's agent learns the seller filed for divorce and must sell within 30 days. The agent's duty is to:
Answer: B. Fiduciary DISCLOSURE runs to the CLIENT: material information the agent learns — including the other party's motivation — must be shared with, and may be used for, the buyer. The agent owes the seller only honesty, not confidentiality.
Question 5 of 5
A listing expires. Two weeks later the seller sells directly to a buyer whom the broker had shown the home during the listing period. The listing contained a 90-day protection clause. The broker is entitled to:
Answer: C. The protection (safety) clause preserves the fee when the owner sells within the protection period to a buyer the broker INTRODUCED during the listing. The standard exception — relisting with another brokerage — doesn't apply here.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Prepaid item (insurance, prepaid taxes): CREDIT seller, debit buyer
- Accrued/unpaid item (taxes in arrears): DEBIT seller, credit buyer
- Statutory year: 360 days/30-day months; actual: 365 — read which the question uses
- Daily rate × days used = share
- Seller usually owns closing day unless stated otherwise
Prorations — Who Owes Whom: FAQs
Is Prorations — Who Owes Whom on the real estate exam?
Yes. Real Estate Math is a scored domain on the real estate licensing exam, and this topic appears in the national portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
