In real estate transactions, what is one purpose of proration?

In real estate transactions, proration is used primarily to ensure equitable distribution of expenses between the buyer and the seller. This practice involves dividing certain costs that are incurred over a specified period, such as property taxes, homeowner association fees, or insurance premiums, based on the number of days each party owns the property during that period.

For example, if a property is sold halfway through the tax billing cycle, the seller would be responsible for their portion of the taxes up until the closing date, while the buyer would take on the responsibility for the time following the closing. This method is crucial because it provides a fair calculation that reflects each party's usage of the property during the period those expenses were accrued. Thus, proration promotes fairness and transparency in real estate transactions, making it a necessary practice in ensuring that expenses are accurately accounted for and that no party is unfairly burdened by costs incurred by the other.