What must be done with certain expenses paid at closing between the buyer and the seller?

When certain expenses are paid at closing between the buyer and the seller, they must be prorated. Proration refers to the allocation of costs between the parties based on the time period for which the expense applies. This means that costs such as property taxes, homeowners association dues, and utility bills are calculated to determine how much of the expense relates to the time before and after the closing date.

For example, if property taxes accrue on an annual basis, and the closing occurs halfway through the year, the buyer would only be responsible for paying the portion of the taxes that applies to their ownership period. Thus, the seller would be credited for the portion of the taxes that covers their time as the property owner.

This ensures a fair distribution of costs and avoids one party unfairly bearing the entire expense for a period during which the other party also benefits from the property. The other options do not correctly reflect the typical financial arrangements at a real estate closing, as they either suggest an equal division or specific payment methods that do not apply to prorated expenses.