An appraiser doing market research found a comparable sale in which the seller took back a...

An appraiser doing market research found a comparable sale in which the seller took back a mortgage with a 20% down payment at 8% per year with monthly payments based on a 30-year amortization but with a five-year balloon payment. The sale price was $104,500. The current market rate for mortgages is 10% for 30 years. A week after the closing, the seller sold the mortgage for $75,000 to a local real estate broker. What is the cash equivalent sale price of this comparable sale?

Expert Solution

A	Sale price	104,500
B	Down payment @20%	20900	A*20%
C	Value of mortgage taken	83,600	A-B

Assuming balloon payments start at the end of 26th year as 1/5th of the outstanding principal every year (83,60/5=16,720 every year from year 26 to year 30)

PV of all cashflows of mortgage = ~52,240

Down payment = 20,900

Cash equivalent price = 20,900+52,240 = 73,140

jeff jeffy answered 2 years ago

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