Which proration method does the TREC Texas Real Estate exam use?

The TREC exam uses both methods depending on the question. The 365-day method (actual days, actual/actual) is the default for most modern proration questions, especially Texas property tax proration. The 360-day method (banker's year, 30/360) appears in mortgage interest questions and any question that explicitly says "use a 360-day year" or "use 30-day months." Always read the question to identify which method is required — they produce different answers.

How are Texas property taxes typically prorated at closing?

Texas property taxes are paid in arrears, meaning the bill for the current year typically isn't due until October-January of the following year. At closing, the seller credits the buyer for the seller's share of the year's taxes (January 1 through closing day). The buyer eventually pays the full annual bill but has already received the seller's portion as a credit at closing. The proration uses the 365-day method by default.

Who pays for the closing day in proration calculations?

The most common convention used on the TREC exam is "seller through the day before closing, buyer from closing day forward." So if closing is July 15, the seller is responsible for January 1 through July 14, and the buyer is responsible for July 15 onward. Some questions specify the seller is responsible through closing day — always read the wording carefully. When unclear, "seller through day before" is the default.

How do I prorate rent on an investment property closing?

If the seller has collected rent for the month and closes mid-month, the seller credits the buyer for the buyer's portion of the month. Calculate the daily rent (monthly rent ÷ days in the month), multiply by the number of days the buyer will own the property in that month, and credit the buyer that amount. Security deposits are NOT prorated — they belong to the tenants and transfer separately as part of the closing.

What's the difference between paying "in arrears" and "in advance" for proration?

"In arrears" means the bill is paid AFTER the period it covers (Texas property taxes work this way — the bill for 2026 isn't paid until late 2026 or early 2027). The seller hasn't paid yet, so the seller credits the buyer at closing for the seller's portion. "In advance" means the bill is paid BEFORE the period it covers (HOA dues paid January 1 for the whole year). The seller has already paid, so the buyer reimburses the seller for the buyer's portion. The math is identical; only the direction of credit changes.

Are security deposits prorated like rent?

No. Security deposits belong to the tenants, not the property owner, and must transfer in full from seller to buyer as part of the closing. The seller cannot keep any portion of a tenant's security deposit when selling the property. Texas Property Code requires the security deposit to be transferred to the new owner along with notice to tenants of the change in ownership.

Texas Real Estate Math: Proration Explained (2026 TREC Exam)

TL;DR

Proration is one of the most heavily tested math topics on the TREC Texas Real Estate Sales Agent exam, appearing regularly on the TREC exam. Proration is how closing costs that span a billing period — property taxes, prepaid rent, HOA dues, mortgage interest, insurance — are divided fairly between buyer and seller based on who occupied or owned the property for what portion of the period. The core method has three steps: (1) figure out the daily rate by dividing the annual or monthly amount by the number of days in the period, (2) count the number of days owned by each party, and (3) multiply daily rate × days for each side. The TREC exam typically uses the 365-day method (also called the "actual days" or "actual/actual" method) but may use the 360-day method (banker's year, also called "30/360") in some questions — read carefully which method the question specifies. This article walks through the most common proration scenarios with worked examples.

Why Proration Matters

When a property changes hands mid-period, certain costs the seller has already paid (or owes) need to be fairly split with the buyer. The two scenarios:

Seller paid in advance, buyer owes seller back: The seller already paid an annual cost like HOA dues. After the sale, the buyer benefits for the rest of the year. The buyer reimburses the seller for the unused portion at closing.

Seller owes for the partial period, buyer will pay later: Property taxes are typically billed in arrears in Texas. The seller owes for the months they owned the property; the buyer will eventually pay the full annual bill but is "credited" the seller's share at closing.

Both scenarios use the same math — just the direction of the credit changes.

The 365-Day Method vs the 360-Day Method

This is the single most important distinction in proration math, and it's where most TREC exam mistakes happen.

365-day method (actual days / actual/actual): Uses the actual number of days in each month and the actual number of days in the year (365, or 366 in a leap year). This is the default for property taxes and most modern Texas closings.

360-day method (banker's year / 30/360): Treats every month as 30 days and every year as 360 days. Used historically and still used in some loan-related calculations.

The TREC exam will tell you which method to use. If it doesn't, on most modern TREC-style property-tax prorations the 365-day method is the more common approach unless the question specifies otherwise. Read the question carefully — phrases like "using a 360-day year" or "banker's year" or "30 days per month" mean use the 360-day method.

Step-by-Step Proration Formula

For any proration:

1. Daily rate = Total cost ÷ days in period 2. Days seller owned = (count up actual days OR use 30-day months) 3. Seller's share = Daily rate × seller's days 4. Buyer's share = Total cost − seller's share (or daily rate × buyer's days)

Pattern 1: Property Tax Proration (Most Common)

In Texas, property taxes are paid in arrears. The seller pays for the portion of the year they owned the property; the buyer pays for the rest when the bill comes due.

Example 1 — 365-day method, mid-year closing: A property's annual tax bill is $7,300. Closing is on July 15. The seller owned the property from January 1 through July 15 (inclusive). What is the seller's share of the property tax?

Step 1: Daily rate = $7,300 ÷ 365 = $20.00 per day

Step 2: Count days from January 1 through July 15: - January: 31 - February: 28 - March: 31 - April: 30 - May: 31 - June: 30 - July (1-15): 15 - Total: 196 days

Step 3: Seller's share = $20.00 × 196 = $3,920

Step 4: Buyer's share = $7,300 − $3,920 = $3,380

At closing, the buyer typically receives a CREDIT of $3,920 (seller's share) and pays the full $7,300 when the tax bill arrives.

Example 2 — 360-day method, same scenario: Same $7,300 tax bill. Same July 15 closing. Using the 360-day method:

Step 1: Daily rate = $7,300 ÷ 360 = $20.28 per day (carry full precision: $20.2777...)

Step 2: Days using 30-day months: January through June = 6 × 30 = 180 days. Plus July 1-15 = 15 days. Total: 195 days.

Step 3: Seller's share = $20.2778 × 195 = $3,954.17

Step 4: Buyer's share = $7,300 − $3,954.17 = $3,345.83

Notice the seller pays slightly more under the 360-day method in this scenario. The methods produce different answers — pick the one the question specifies.

Pattern 2: Determining Who's Responsible for Closing Day

The TREC exam often tests whether the buyer or seller is responsible for the closing date itself. The standard convention:

The most common exam convention is that the seller is responsible through the day before closing. The buyer is responsible from the closing day forward.

So a closing on July 15 means: - Seller's days: January 1 through July 14 = 195 days (365-day method) - Buyer's days: July 15 through December 31 = 170 days

However, some TREC exam questions specify the seller is responsible through closing day. Read carefully — the wording determines who pays for that one day. If unclear, the standard convention (seller through day before) is the default.

Pattern 3: Prepaid Rent Proration (Investment Properties)

When an investment property sells mid-month, any prepaid rent the seller has collected from tenants must be prorated to the buyer.

Example 3 — rent proration: A duplex generates $2,400 per month in total rent ($1,200 per unit × 2 units). The closing date is March 20. The seller has already collected the full March rent. How much does the seller owe the buyer for prepaid rent?

Using the 365-day method (or treating March as 31 days):

Step 1: Daily rent = $2,400 ÷ 31 = $77.42 per day

Step 2: Buyer's days in March (March 20 through March 31) = 12 days

Step 3: Buyer's share = $77.42 × 12 = $929.03

The seller credits the buyer $929.03 at closing for the rent that "belongs" to the buyer's ownership period.

Important Texas detail: Security deposits transfer separately and are not prorated — they belong to the tenants and must be transferred from seller to buyer in full as part of the closing.

Pattern 4: HOA Dues Proration

Many Texas residential properties have HOA dues paid annually, semi-annually, or quarterly. If paid in advance by the seller, the buyer reimburses for the unused portion.

Example 4 — HOA proration: HOA dues are $1,800 per year, paid in advance on January 1. Closing is October 1. The seller owned the property from January 1 through September 30 (using "seller through day before closing").

Step 1: Daily rate = $1,800 ÷ 365 = $4.93 per day

Step 2: Buyer's days = October 1 through December 31 = 31 + 30 + 31 = 92 days

Step 3: Buyer reimburses seller = $4.93 × 92 = $453.70

The buyer pays the seller $453.70 at closing because the seller already paid the full year's HOA dues but owned the property for only part of the year.

Pattern 5: Mortgage Interest Proration

When a buyer assumes a loan or there's a special arrangement involving mortgage interest, the interest may be prorated. This usually uses the 360-day method (because that's how lenders calculate interest historically).

Example 5 — interest proration: A loan has a balance of $240,000 at 7% annual interest. Closing is on the 18th of the month. Calculate the seller's interest for the month using the 360-day method.

Step 1: Annual interest = $240,000 × 0.07 = $16,800

Step 2: Daily interest = $16,800 ÷ 360 = $46.67

Step 3: Seller's days (using "through day before closing") = 17 days

Step 4: Seller's interest = $46.67 × 17 = $793.33

Common TREC Exam Mistakes

Mistake 1: Using the wrong day-count method. Read the question carefully. "365-day year" and "actual days" mean one thing; "360-day year" or "30-day months" mean another. They produce different answers.

Mistake 2: Counting closing day for both parties. Closing day belongs to one party only — typically the buyer. Don't double-count it.

Mistake 3: Off-by-one errors in date counting. "From March 1 through March 15" includes both endpoints — that's 15 days, not 14. Count the start date AND the end date when both are inclusive.

Mistake 4: Forgetting which direction the credit flows. If the seller paid in advance (HOA dues paid Jan 1), the buyer reimburses the seller. If the seller hasn't paid yet (property taxes due in November), the seller credits the buyer. Always ask: "who has been benefiting without paying yet, or who has paid without fully benefiting?"

Mistake 5: Rounding the daily rate too aggressively. $7,300 ÷ 365 = $20.00 exactly, but $5,475 ÷ 365 = $14.9999... Carry the daily rate to at least 4 decimals through intermediate steps; only round at the end.

Quick Reference: When to Use Which Method

Cost Type	Default Method	Notes
Texas property taxes	365-day	Most common modern exam approach
Mortgage interest	360-day	Traditional lending-industry convention
HOA dues	365-day	Use 360-day if question specifies
Prepaid rent	365-day or actual month	Use the actual days in the rental month
Insurance premiums	365-day	Read question carefully

When in doubt, the TREC exam's 365-day method is the most common correct answer.

Practice Problems

Problem 1: Annual property tax is $5,475. Closing is May 1, 365-day method, seller responsible through April 30. What is the seller's share?

Problem 2: A property's HOA dues are $2,400 per year, paid in advance on January 1. Closing is September 15, 365-day method, seller through September 14. How much does the buyer reimburse the seller?

Problem 3: Annual property tax is $7,300. Closing is July 1, 360-day method, seller through June 30. What is the seller's share?

Solutions:

Daily = $5,475 ÷ 365 = $15.00. Seller's days (Jan 1 - Apr 30) = 31+28+31+30 = 120 days. Seller's share = $15.00 × 120 = $1,800.
Daily = $2,400 ÷ 365 = $6.5753. Buyer's days (Sept 15 - Dec 31) = 16+31+30+31 = 108 days. Buyer reimburses = $6.5753 × 108 = $710.14.
Daily = $7,300 ÷ 360 = $20.2778. Seller's days (360-day method, Jan-June) = 180. Seller's share = $20.2778 × 180 = $3,650.

Frequently Asked Questions

Which proration method does the TREC Texas Real Estate exam use?: The TREC exam uses both methods depending on the question. The 365-day method (actual days, actual/actual) is the default for most modern proration questions, especially Texas property tax proration. The 360-day method (banker's year, 30/360) appears in mortgage interest questions and any question that explicitly says "use a 360-day year" or "use 30-day months." Always read the question to identify which method is required — they produce different answers.
How are Texas property taxes typically prorated at closing?: Texas property taxes are paid in arrears, meaning the bill for the current year typically isn't due until October-January of the following year. At closing, the seller credits the buyer for the seller's share of the year's taxes (January 1 through closing day). The buyer eventually pays the full annual bill but has already received the seller's portion as a credit at closing. The proration uses the 365-day method by default.
Who pays for the closing day in proration calculations?: The most common convention used on the TREC exam is "seller through the day before closing, buyer from closing day forward." So if closing is July 15, the seller is responsible for January 1 through July 14, and the buyer is responsible for July 15 onward. Some questions specify the seller is responsible through closing day — always read the wording carefully. When unclear, "seller through day before" is the default.
How do I prorate rent on an investment property closing?: If the seller has collected rent for the month and closes mid-month, the seller credits the buyer for the buyer's portion of the month. Calculate the daily rent (monthly rent ÷ days in the month), multiply by the number of days the buyer will own the property in that month, and credit the buyer that amount. Security deposits are NOT prorated — they belong to the tenants and transfer separately as part of the closing.
What's the difference between paying "in arrears" and "in advance" for proration?: "In arrears" means the bill is paid AFTER the period it covers (Texas property taxes work this way — the bill for 2026 isn't paid until late 2026 or early 2027). The seller hasn't paid yet, so the seller credits the buyer at closing for the seller's portion. "In advance" means the bill is paid BEFORE the period it covers (HOA dues paid January 1 for the whole year). The seller has already paid, so the buyer reimburses the seller for the buyer's portion. The math is identical; only the direction of credit changes.
Are security deposits prorated like rent?: No. Security deposits belong to the tenants, not the property owner, and must transfer in full from seller to buyer as part of the closing. The seller cannot keep any portion of a tenant's security deposit when selling the property. Texas Property Code requires the security deposit to be transferred to the new owner along with notice to tenants of the change in ownership.

Bottom Line

Proration on the TREC Texas Real Estate exam follows a consistent three-step formula: find the daily rate, count the days, multiply. The biggest sources of error are choosing the wrong day-count method (365 vs 360), making off-by-one errors in date counting, and confusing which direction the credit flows (seller-paid-in-advance vs seller-owes-in-arrears). For property taxes (the most-tested proration scenario), default to the 365-day method and remember Texas taxes are paid in arrears. Practice with at least 20-30 proration problems before exam day. For more Texas exam math, see our commission calculations guide, the Texas exam math overview, and the broader Texas Real Estate Exam preparation resources including the exam day guide.

Source: Texas Real Estate Commission (TREC) · Texas Comptroller — Property Tax · Texas Property Code Chapter 92 (Security Deposits)