In a closing statement, what does it indicate when some entities are shared between the buyer and seller?

In a closing statement, shared entities between the buyer and seller typically indicate prorated expenses. Proration is a method used to fairly distribute certain costs, such as property taxes, homeowners association fees, or utility bills, based on the percentage of time each party is responsible for those expenses leading up to the closing date.

For example, if property taxes are due annually and the closing occurs mid-year, the seller is responsible for the taxes up until the closing date, and the buyer is responsible for the remaining portion of the year. The shared entities in this case are the prorated portions of those taxes, which reflect the actual usage of the property by each party.

This understanding is essential for accurate financial negotiation and transparency in the transaction process. Recognizing prorated expenses ensures that both parties are fair in their financial dealings concerning shared costs. Each party should only bear the financial responsibility for the time they owned the property during the billing cycle.