What term describes the division of expenses and income between the buyer and seller?

The term that describes the division of expenses and income between the buyer and seller is proration. This process is essential in real estate transactions to ensure that both parties fairly share the costs and revenues associated with the property.

Proration typically applies to items like property taxes, utility bills, homeowner association fees, and rental income, among others. When a property changes hands, some expenses may need to be allocated for the time the seller owned the property and the time the buyer will own it during the billing period. By prorating these expenses, it ensures that neither party is unfairly burdened or benefited by expenses incurred before or after the sale takes place. This process is usually documented in the closing statement or settlement statement at the time of the closing, providing a clear picture of what amounts are owed or due from each party based on the agreed-upon closing date.