Question: An appraiser is looking for comparable sales and finds a property that recently sold for $ 2 0 9 , 0 0 0 . The

An appraiser is looking for comparable sales and finds a property that recently sold for $

209, 000 .

The appraiser finds that the buyer was able to assume the seller

s fully amortizing mortgage, which had monthly payments based on a

7

percent interest. The balance of the loan at the time of sale was $

143, 000

with a remaining term of

15

years

(

monthly payments

) .

The appraiser determines that if a $

143, 000

loan was obtained on the same property, monthly payments at the market rate for a

15 -

year fully amortizing loan would have been

8

percent with no points.

Required:

Assume that the buyer is expected to benefit from the interest savings on the assumable loan for the entire loan term. What is the cash equivalent value of the property?

What is the cash equivalent value of the property if you assumed that the buyer is only expected to benefit from interest savings for five years because he would probably sell or refinance after five years?

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