On a settlement statement, how is the prorated rent calculated if a tenant has already paid $1200 rent for a month and the property closes on the 15th?

The correct answer involves understanding how prorated rent is allocated when a property closes midway through a rental period. In this scenario, the tenant has already paid $1200 for the month. Since the property closes on the 15th, we need to determine how much of that prepaid rent corresponds to the period the new owner will occupy the property.

The monthly rent of $1200 implies a daily rent of $40 (calculated as $1200 divided by 30 days). From the 1st to the 15th, the tenant has occupied the property for 15 days, which amounts to $600 (15 days times $40 per day). The new owner is entitled to receive this prorated amount for the days they own the property starting on the 15th.

As a result, the seller (current owner) must reimburse the buyer (new owner) for the days that the buyer will have ownership but will not receive the rent initially collected from the tenant. Thus, the seller will receive a $600 credit, as this is the amount that corresponds to the occupancy by the tenant during the first half of the month, and the buyer will have a $600 debit for the same amount to balance the settlement statement.

This allocation accurately