Holly and Josh paid 10% down for their $245,000 home in 2004. If they sell their house for $255,000 in 2010, what will the value of their equity be?

Question

Quizplus · Accepted Answer

The down payment was 10% of $245,000, which is $24,500. The equity in the home after selling it for $255,000 would be the sale price minus the original price plus the down payment: $255,000 - $245,000 + $24,500 = $34,500. However, the correct calculation for equity should actually consider the total amount paid off on the home's principal, which in this case starts with the down payment. Since the question does not provide details on the amount paid towards the principal over the years, the initial interpretation of equity would be the profit from the sale plus the down payment, leading to a misunderstanding in the explanation. The correct equity value considering only the information given (down payment and profit from sale) should be the down payment ($24,500) plus the profit from the sale ($255,000 - $245,000 = $10,000), totaling $34,500. However, given the options provided and the typical understanding of home equity (down payment + any increase in home value), the closest correct answer based on the options given and initial purchase and sale prices would be the initial down payment plus the profit, which was not directly listed among the choices. Therefore, the explanation aimed to match the provided options, but it seems there was a mistake in the calculation process. The correct approach to find the equity based on the given options and assuming the profit is considered part of the equity would be: down payment + profit = $24,500 + $10,000 = $34,500, which does not match any of the provided options directly. Given this, the response should have focused on the correct calculation of equity based on the information provided, which involves acknowledging the error in the initial explanation. The initial down payment is indeed $24,500, and the profit from the sale is $10,000, making the total equity increase if only considering these factors $34,500, not directly matching the provided answer choices.

Holly and Josh Paid 10% Down for Their $245,000 Home