The following is an edited excerpt from Phil Mitsch’s Book "How To Have A Successful Home Selling Attitude."  This Book is the first of 12 that comprises his Home Seller Solutions Program and it is currently available.

My Philosophy About The Different Types Of Real Estate Values is as follows:

Despite traditional belief and verbal usage the fact of the matter is that every piece of real estate has a Value Range. It is not worth just one figure. I refer to this Value Range as Fair Market Swing In Value. It is extremely important for home buyers, home sellers, real estate and mortgage and licensees, builders, attorneys, financial advisors, and other miscellaneous servicing company personnel who are involved in the entire home buying, home selling, and lending processes to understand that every piece of real estate has a Fair Market Swing In Value. Why? The reason is the entire home buying, home selling, and lending processes could be handled far more proficiently, professionally, productively, and successfully because a lot of listing, selling, and lending misconceptions about real estate values could be eliminated. Over the years these misconceptions have caused hundreds of thousands of real estate transactions to either: 1) terminate, or 2) have to be renegotiated after buyers and sellers have signed agreements of sale.

The 7 Real Estate Values

Now here are the 7 Real Estate Values that each piece of real estate potentially has.

Value #1:   Base Value

Value #2:   Upgrades and Extras Value

Value #3:   Adjusted Base Value

Value #4:   Swing Value

Value #5:   Fair Market Swing In Value

Value #6:   Special Value

Value #7:   Deficiency Value

Special Note

As a practicing residential Realtor I educated my sellers and buyers about what these 7 Real Estate Values were during both my Listing Presentations and Mortgage Pre-qualification Sessions.

Now let’s analyze exactly what each one of these 7 Real Estate Values are.

Value #1:   Base Value

The Base Value of a piece of real estate is the value it has without the lending industry’s appraisal allowance for upgrades and extras and Seller Concessions. Seller Concessions meaning discount point and settlement cost assistance to buyers.

Value #2:   Upgrades And Extras Value

The Upgrades and Extras Value of a piece of real estate is the additional value it has over its Base Value based upon the lending industry’s appraisal allowance for the value of the upgrades and extras.

Value #3:   Adjusted Base Value

The Adjusted Base Value of a piece of real estate is the value it has when you add its Base Value to its Upgrades and Extras Value.

Value #4:   Swing Value

The Swing Value of a piece of real estate is the value it has over the Adjusted Base Value based upon the lending industry’s appraisal allowance for Seller Concessions. Again, Seller Concessions meaning discount point and settlement cost assistance to buyers. Swing value is normally limited to 3% to 6% above the Adjusted Base Value due to lending industry limitations pertaining to the amount of Seller Concessions that home sellers are permitted to pay for their home buyers.

Value #5:   Fair Market Swing In Value

The Fair Market Swing In Value of a piece of real estate is the value it has when you add its Swing Value to its Adjusted Base Value.

Value #6:   Special Value

The Special Value of a piece of real estate is the value it potentially has over and above its Fair Market Swing In Value. Special Value occurs when Special Financing is available and usually results because home buyers are willing to pay more than Fair Market Swing In Value based on available comparable sales information. Why? The reason is home buyers are able, in most cases, to obtain a lower monthly mortgage payment as a result of the existence of Special Financing. Now here are some examples of what I mean by Special Financing.

3 Examples Of Special Financing

          Example #1:   Sellers have an assumable mortgage that does not require buyer mortgage
                                 processing, at an interest rate below the going rate of interest. I refer to this
                                 type of Special Financing as a mortgage take over (MTO).

          Example #2:   Sellers have an assumable mortgage that does require buyer mortgage
                                 processing, at an interest rate below the going rate of interest. I refer to
                                 this type of Special Financing as a mortgage assumption.

          Example #3:   Sellers are in a position to hold a first, second, etc. mortgage at an interest
                                 rate below the going rate of interest

Value #7:  Deficiency Value

The Deficiency Value of a piece of real estate is the value that is subtracted from its Base Value due to the existence of cosmetic and functional deficiencies. Deficiency Value is subtracted because it decreases the value of real estate.

Examples Of Different Dollar Amount Values That A Piece Of Real Estate Can Potentially Have

Now let me give you specific Dollar Amount Examples of the 7 Real Estate Values I have just listed and that potentially applies to every piece of real estate.

1.   Base Value = $200,000

2.   Upgrades and Extras Value = $20, 000

3.   Adjusted Base Value = $220,000

4.   Swing Value = $13,200 (6% of $220,000)

5.   Fair Market Swing In Value = $220,000 to $233,200

6.   Special Value = $240,000 to $250,000

7.   Deficiency Value = the $ amount to correct the deficiency in a professional and
                                       workman-like manner

Understanding The 7 Real Estate Values Is Critically Important

Knowing what the 7 Real Estate Values and how to calculate them makes it much easier for home buyers, home sellers, real estate licensees, mortgage licensees, appraisers, and virtually anyone for that matter, to establish the Fair Market Swing In Value of any piece of real estate properly, thoroughly, and with literally laser beam accuracy.