The Value of Mortgage Assumptions: An Empirical Test
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.
Volume (Year): 5 (1990)
Issue (Month): 2 ()
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vinod B. Agarwal & Richard A. Philips, 1985. "The Effects of Assumption Financing Across Housing Price Categories," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(1), pages 48-57.
- Terrence M. Clauretie, 1983. "A Note on the Bias in House Price Capitalization Models," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(4), pages 521-524.
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