property tax proration

[Jeremy H.]

I noticed the title companies (the ones here I have dealt with anyway) take the number of days the seller occupies and credit the buyer in prorated property tax,

To figure the amount per day they take a 1/2 year amount (typically in the county tax bill for 1 installment),   divide by 180 and then multiply by seller occupied days.

My question is, shouldn't the division be by 182.5 days, or 183 days in a leap year?   The seller is guaranteed over compensates the buyer by about 1% for this  (182.5/180.0).

Before I get too far,

I am trying to claim my property tax deduction (as a buyer) and I would subtract what the title company says the seller has credited me, but I question the accuracy of using 180 days.

As a seller, I also would claim that number for prorated property tax I credited the buyer by what the title company says in the final HUD.. (not likely the one on signing day but the one where they figured the errors and refunded)

thanks

[Chris Mason]

Originally posted by @Jeremy H.:

I noticed the title companies (the ones here I have dealt with anyway) take the number of days the seller occupies and credit the buyer in prorated property tax,

To figure the amount per day they take a 1/2 year amount (typically in the county tax bill for 1 installment),   divide by 180 and then multiply by seller occupied days.

My question is, shouldn't the division be by 182.5 days, or 183 days in a leap year?   The seller is guaranteed over compensates the buyer by about 1% for this  (182.5/180.0).

Before I get too far,

I am trying to claim my property tax deduction (as a buyer) and I would subtract what the title company says the seller has credited me, but I question the accuracy of using 180 days.

As a seller, I also would claim that number for prorated property tax I credited the buyer by what the title company says in the final HUD.. (not likely the one on signing day but the one where they figured the errors and refunded)

thanks

Bay Area tech nerds might appreciate this. Urban legend, who knows how true, but here goes...

 Financial institutions use 360 day years as a hold-over from mechanical calculating devices. 

12 months a year times 30 year mortgage = 360 payments

360 day year divided by 12 months a year = 30 day months

And so on. For a mechanical calculating device, or perhaps even a budget/entry-level early vacuum tube computer, you would hard code the relationship between 12, 30, and 360 and force everything to fit into the 12/30/360 paradigm. The mechanical calculator might ONLY be able to do this, and the early computer might be 10x as fast doing it this way. So all months are 30 days, half years are 180 days, mortgages are 360 months (30YF) or 180 months (15YF), years are 360 days long, P&I payment in a month is the same if it's a 28 day or 31 day month, etc etc. 

Diving by 2 to get a 180 day half-year, or 180 month payment term, is easier than making a cost effective 19th century mechanical calculator deal with 182.5 days in a half-year.

Half the time you are buying, half the time you are selling, so irregularities like what you highlighted will average out in the end.