What does proration ensure at a real estate closing?

Proration at a real estate closing refers to the process of dividing and assigning costs or obligations between the buyer and seller based on the period each party is responsible for those costs. This ensures that all expenses such as property taxes, utilities, and insurance premiums are fairly allocated, reflecting the actual time each party occupies the property or holds financial responsibility.

The correct answer highlights the importance of addressing tax liabilities specifically. In real estate transactions, property taxes are often paid in advance, and proration adjusts these costs so that the buyer pays only for the time they own the property after closing, while the seller is responsible for taxes up to that date. This ensures that both parties are paying their fair share based on the ownership duration.

The other options, while related to costs associated with a real estate transaction, do not encapsulate the primary purpose of proration as it pertains directly to tax liabilities during the closing process. Thus, understanding the focus on tax liabilities helps clarify the significance of prorating in ensuring equitable cost distribution at closing.