When it comes to real estate transactions, accuracy is everything—especially when calculating prorated expenses between buyers and sellers. One key term that plays a vital role in this process is the calendar year.
What Is a Calendar Year?
In real estate, a calendar year refers to the standard 365-day period used when prorating expenses—such as property taxes, mortgage interest, insurance, or HOA dues—during a transaction.
Using the actual number of days in the year ensures that each party pays their fair share based on how long they owned or occupied the property.
📌 Example: When determining the prorated amounts, the lender used a 365-day calendar year to figure out the daily costs.
Why Calendar Year Prorating Matters
Whether you’re a buyer, seller, agent, or lender, prorations ensure that ownership responsibilities are divided accurately.
Using the calendar year method:
- Reflects true daily rates based on a full year
- Offers precise cost division (especially for leap years or mid-year closings)
- Is commonly used by lenders and title companies
Calendar Year vs. 360-Day Year
There are two primary methods for prorating:
| Method | Description | Used By |
| Calendar Year (365 days) | Uses actual number of days in a year | Most real estate closings, lenders |
| Banker’s Year (360 days) | Assumes 30 days/month | Some financial institutions, mortgage amortization |
While both are acceptable, the calendar year method is generally more accurate, especially when dealing with tax and insurance prorations.
When Is the Calendar Year Used?
You’ll see calendar year prorations during:
- Closing day calculations
- Property tax and utility adjustments
- Interest charges and escrow adjustments
- Final buyer/seller settlement statements
It helps ensure that each party is responsible for expenses incurred during their ownership period.
Final Thoughts
Understanding how the calendar year affects prorations can prevent surprises at the closing table. For both buyers and sellers, it ensures fairness and transparency when it comes to financial obligations.
Disclaimer: Informational Purposes Only
The content provided in this blog is for informational purposes only and is intended to offer general insights into real estate and legal topics. It is not directed at any specific individual or entity and should not be considered professional advice.
Hassaan Alam, The Alam Group, and the author of this blog do not provide legal, financial, or tax advice. Readers should consult with qualified professionals, such as attorneys, accountants, or tax advisors, before making any real estate, investment, or financial decisions.
While we strive to provide accurate and up-to-date information, we do not guarantee its completeness or reliability. Any reliance on this content is at your own discretion and risk.
