22. Which of the following items would be prorated at closing with the credit going to the seller?
Answer: D
Unearned rent collected in advance would be prorated at closing with the credit going to the seller.
When a tenant pays rent in advance, the seller is entitled to receive the portion of rent that corresponds to the time period after the closing date. Therefore, unearned rent collected in advance is credited to the seller during the closing process.
A) accrued interest on an assumed mortgage
Accrued interest on an assumed mortgage is typically prorated at closing, but it is credited to the buyer, not the seller. This is because the buyer will be responsible for making the interest payment moving forward, therefore any accrued interest up to the closing date would be a cost incurred by the buyer.
B) prepaid property taxes
Prepaid property taxes are also usually prorated at closing, but the credit typically goes to the buyer. Since the buyer will benefit from the prepaid taxes for the period after closing, the seller receives a debit for the amount of taxes covering the time after the sale.
C) earnest money
Earnest money is a deposit made by the buyer to demonstrate serious intent to purchase the property. It is not prorated at closing; instead, it is applied towards the buyer's down payment or closing costs and does not involve a credit to the seller.
D) unearned rent collected in advance
Unearned rent collected in advance is credited to the seller at closing because it represents money that the seller has received for a period of time that extends beyond the closing date. This ensures the seller is compensated for the rental income they will not be able to collect after the sale.
Conclusion
The correct answer is unearned rent collected in advance, as it directly compensates the seller for rent that they have already received for the period beyond the closing date. All other options involve costs or credits that either go to the buyer or do not apply in the same manner, making them incorrect in this context. Thus, option D is the only choice that aligns with the requirement for a credit to the seller at closing.