An appraiser is looking for comparable sales and finds a house that recently sold for $100,000. He finds that the buyer was able to assume the seller’s mortgage which had an 8% interest rate. The balance of the loan at the time of the sale was $70,000 with a remaining term of 15 years (monthly payments). The appraiser determines that if a $70,000 loan was obtained on the same property, the market rate for a 15-year loan would have been 9% with no points.Assume that the buyer expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the loan? What is the maximum price the house should sell for?
This question was answered on: Sep 21, 2023
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