I have a 1986 4x4 straight 6 F150 that grinds when attempting to down shift. The transmission was just rebuilt last month so I dont think it's a transmission issue. The clutch is new as well. When trying to down shift it sounds like all the gears are grinding and the gears are still spinning. The only way to get it to shift is to try to put the 4wd in neutral, then 2H and then try to shift. Sometimes it works, but most of the time it doesnt. I took the truck to a mechanic and he thinks (but isn't sure) it's a transfer case problem, but a rebuilt transfer case is around $700.

Does this sound like a transfer case problem?

I am trying to sell the truck because i've spent tons of money on it. Now I am second guessing myself and am thinking about getting it fixed.