The Value of Mortgage Assumptions: An Empirical Test

Mark A. Sunderman (), Roger E. Cannaday () and Peter F. Colwell ()
Additional contact information
Mark A. Sunderman: Department of Business Administration PO Box 3275 University Station University of Wyoming Laramie, Wyoming 82071, http://business.uwyo.edu/
Roger E. Cannaday: Department of Finance University of Illinois 1407 Gregory Drive-304 A DKH Urbana, Illinois 61801, http://www.cba.uiuc.edu/finance/
Peter F. Colwell: Department of Finance University of Illinois 1407 Gregory Drive-304 A DKH Urbana, Illinois 61801, http://www.cba.uiuc.edu/finance/

Journal of Real Estate Research, 1990, vol. 5, issue 2, 247-258

Abstract: This study provides an empirical test of the two main techniques for calculating the financing premium for assumption financed sales, cash equivalence adjustment (CEA) and financed-fee valuation adjustment (FFVA). The results indicate that both the CEA and FFVA computational techniques overvalue the premium associated with assumption financing. A variation of the empirical test is considered that differentiates this study from previous studies. This variation allows for a test of the hypothesis that the proportion of the financing premium capitalized into the sales price is a function of the loan-to-price ratio. It is concluded that this hypothesis cannot be rejected.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1990
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Citations: View citations in EconPapers (3)

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