PSI Virginia Real Estate Complete Practice Exam

Prorated property taxes are determined by using the daily tax rate based on the closing date. This method involves calculating the total annual property tax and then determining the daily tax rate by dividing the annual tax amount by 365 days. From there, this daily rate is multiplied by the number of days each party will own the property during the tax year.

For the buyer, this means calculating the property taxes from the closing date onward, while the seller is responsible for the taxes for the portion of the year they owned the property up to the closing date. This approach ensures that both parties are fairly charged for their respective share of the property taxes according to their ownership duration in the property for that tax year.

The other options do not accurately reflect the methodology used for prorating taxes. For instance, simply multiplying the annual tax by the home price would not provide a fair distribution, as it disregards the actual ownership period and tax responsibility. Estimating based on previous years could lead to inaccuracies, and assessing market trends is unrelated to how tax proration specifically works in the context of property ownership during the year of sale.