In the sequence of adjustment, what is the first item to be adjusted?

• A. Property rights
• B. Financing terms
• C. Time
• D. Physical condition

Answer: (C)

The main idea is prorations for ongoing obligations, which are determined by timing. When a property sells, many costs cover a period of time—taxes, utilities, rents, HOA fees, etc.—so the very first thing to decide is how that time is split between the seller and the buyer based on the closing date and possession date. Establishing the time-based prorations sets the baseline for what portion of those costs the seller owes and what portion the buyer owes.

Once the time-based adjustments are set, you can handle other adjustments in later steps: what specific property rights transfer (and under what terms), the financing terms attached to the deal, and any credits or repairs tied to the physical condition of the property. But without locking in the time frame, you wouldn’t be able to accurately prorate the ongoing charges that occur during the period of ownership transition.