Question

Real estate deals usually have substantial transaction costs. Realtor�s fees average 6% and are paid by the seller. Loan origination fees, title insurance fees, etc., will often cost the buyer 1.5%. These closing costs must be apportioned between the buyer and the seller�for the property purchase and for its later sale. How should the property's value at the horizon be determined? What is it?
Purchase price now

$144,000

Purchase Price Later

$160,000

Property Taxes 1.8%

$2,592

Property Taxes 1.8%

$2,880

Insurance

$1,030

Insurance estimated

$1500

Answer 1

Answer:

The property's value now is $157,392.00  and $174,880.00  later as calculated below in explanation section.

The price of $157,392.00 is much more justified than later cost of $174,880.00 which implies savings of  $17,488.00.

Step-by-step explanation:

Purchase price now  $144,000.00 Purchase price later $160,000  

Property tax @1.8%    $2,592.00 Property tax @1.8% 2880.00

Insurance                    $1,030.00    Insurance                  1500.00

Realtors fees 6%            $8,640.00    Realtors fees 6%           9600.00

Other costs(1.5%-insurance)$1,130.00 Other costs(1.5%-insurance) 900.00

Total costs         $157,392.00       Total costs                  $174,880.00