Daily Rate = Annual Amount / 365, then multiply by days. The 360-day banker year trap and who owes what at closing.
How to solve it, step by step
- Divide the annual amount by 365, or by 360 if the question specifies a banker’s year.
- Count the days precisely for the period in question.
- Multiply the daily rate by the number of days.
- Decide who is debited and who is credited.
Worked examples
What the NY exam actually asks
Prorations decide who owes what on closing day. The seller is responsible through the day of closing in most NY practice, and the exam will tell you which convention to use.
Try one yourself
Annual taxes are $5,475, already paid in full by the seller. Closing is 100 days before year end. Using a 365-day year, what is the buyer’s share?
Show the answer
$1,500. The daily rate is $5,475 ÷ 365 = $15/day. The buyer owns the property for the final 100 days, so the buyer reimburses the seller $15 × 100 = $1,500.
Common mistakes
- Using 365 when the question says to use a 360-day banker’s year, or the reverse.
- Crediting the wrong party. Work out who already paid and who is being reimbursed.
- Miscounting the days. Count carefully to the closing date.
Questions students ask
Who pays for the day of closing in New York?
Conventionally the seller is responsible through the closing date, but the exam will state the convention it wants.
When is a 360-day year used?
Some lenders and exam questions use a 360-day banker’s year for simplicity. Use whichever the question specifies.
Related formulas
- How to calculate property tax from a mill rate
- The T-method
- All 12 formulas — NY Real Estate Math Cheat Sheet
- Real Estate Math Calculator