ARV Real Estate
I’ve been receiving considerable feedback from people concerned about calculating the after repaired value (ARV) on a property so they can find out the max hard money loan amount they can receive.
The biggest question is – How do you determine the ARV?
And more importantly I’ve been seeing… How do you get an ARV that will be close to what your independent property evaluators come up with?
The reason is that people don’t want to pay evaluation fees and not get the financing they want. Which is an extremely valid concern, so let’s address that.
Calculating the ARV for a fix and flip is pretty simple, you look at what comps with the repairs you are planning on making have sold for in the last six to twelve months.
Our independent evaluators will look at 18 comps minimum.
The key here is knowing the area – the reason we use so many comps is to get a good sampling of the current housing market in that specific area.
We get 2-3 reports back on each property we evaluate. They contain about the same data as a full appraisal.
As long as all the reports are within 10% of each other, we will set the ARV at the lowest number. We do this because as a company, we are conservative on our lending.
We’ve found that we are able to keep foreclosures at a minimum by following these guidelines.
The specific amounts will vary depending on the deal. Our Portfolio Manager makes the final determination on that.
Here’s something you need to be careful of when running these figures:
Many people will try to determine an ARV by looking at a computer system like Zillow or the county assessor records.
Those are NOT accurate for value! You can use them to look up sale prices, but don’t try basing your ARV off of what they say the property is worth.
The best thing to do is have your property concierge or real estate agent run comparables on the MLS for you.
Look at no less than 10 comps and average out the sales price on them.
Unfortunately this isn’t an exact science because property values are opinion, which make them subjective…
But if you follow this guideline, your own calculations will be really close to what our evaluators come up with.
This is just one of the areas that we really focus on helping people with through our Find-Fund-Flip Program.
Check out the entire program and see if it’s a good fit for you:
Get More Information
or give us a call 801-692-7703
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