What calculation method do real estate agents commonly use for tax prorations?

Real estate agents often use the 365-day method for tax prorations because it provides a more accurate calculation of daily interest or costs when dealing with real estate transactions involving property taxes. In the 365-day method, the total annual tax amount is divided by 365 days to determine the daily tax rate. This method accounts for the actual number of days in a year, leading to a precise proration that reflects the exact amount of time a property was owned or occupied during the tax year.

Utilizing the 360-day method, which assumes every month has 30 days, could lead to inaccuracies since it simplifies the calculation but doesn't account for the variations in the number of days in each month and in leap years. The Actual/Actual method can also be applied, but it is less common than the 365-day method when calculating prorations in real estate transactions, primarily for tax purposes. The Simple interest method typically pertains to loan calculations rather than tax prorations, making it less relevant to the context of real estate tax computations. Therefore, the 365-day method is favored for its accuracy and precision in reflecting actual ownership.