Heather, I think what the seller might be asking for is a 7% return on money or (interest rate equivalent) sorry so late on the discussion.
If seller is asking you to pay more for what you have already agreed to in writing than perhaps you need an attorney.
I am curious if the seller owns the property "out right" why not carry the note? It is a better legal standing for both parties and it will allow you full ownership rights and he/she less liability.
Just a note there is no inventory for your type of property thus making it more valuable. The market in Prescott is slowly relaxing in the past 2 months but should see a gain in the next 2 months
Here are all condos listed for sale in Prescott- http://goo.gl/m5xRSj
Here is a sample Market report to let you see what has sold in the area http://goo.gl/6nqEmf