How do you estimate ARV?

Question

I just found a duplex with some potential. How should I go about estimating the ARV on it? I am hoping for a step by step of what you guys might do when deciding what the ARV is. Or do you just ask the agent to do it?

Carson Fox · Answer

Michael,

I'm sure everyone else who has responded already has a lot more experience than I do, but I'll try to answer this to the best of my knowledge. Yes, you can use a realtor to find these numbers and they will most likely get a more accurate number than you do. You do need to learn the basics on how to find a pretty good ARV though. You don't want to have to use a realtor each time you are looking at a house.

Easiest way to learn is:

1: Type the property address on zillow and pull up the house.

2. In the top right corner of the page it says "Expand". Click this.

3. After the new page opens, scroll down and on the right page it will say similar sales. Click this.

4. It will pull up recent sales in the area for houses that are similar to the one you initially inputed into the search.

5. If you find houses that are already updated you can use these to figure out about what the ARV should be.

Make sure the comparable's are within +/- 20% of the square footage of the house you are looking into.

Within 1 mile of the house

Have same number of beds and baths, or very close

If it is an older house you can look at other houses that are within +/-20-30 years old, if it is a newer house you want no more than +/- 10 years.

Finally, try to get atleast 3 comparable houses to get the comps from. After you have these three houses, add the total square footage up and divide by three to get the average. Then add the total price of all three houses together and get the average selling price. Now divide the average purchase price by the average square footage and this will give you the average square footage price. Multiply this number by the total square footage of your house and it should get you pretty close to the actual ARV.

John Thedford · Answer

Here are some tips for using comps:CIA--if the COMP is INFERIOR, ADD to the subject. Subject properties are never adjusted. So, if the comp has one less bathroom, add say 5K to the comp's value.CBS--if the COMP is BETTER, SUBTRACT for what is better. This could be bathrooms, bedrooms, condition, construction, view, etc.

Always try to find comps within 1 mile and sales less than 6 months old. If you cannot find any that close, you may have to widen your search.

Brian Garrett · Answer

The best and most accurate way is to have your real estate agent run the comps.

If you want to do it yourself you can look up CLOSED SALES on Realtor.com, Redfin, Zillow, etc.

Just make sure you are comparing properties apples for apples when determining the ARV.

Michael Faudoa · Answer

@Charlie MacPherson thank you so much! The info is great, and I will definitely be referencing that spreadsheet. Cant say enough how much I appreciate the help guys.

Charlie MacPherson · Answer

@Michael Faudoa I use a spreadsheet to run comps. A sample is below.

There are 3 sections in my comps.

The top section is the subject property.

The middle section is "sold properties", preferably sold within 6 months and 1/4 mile radius.  Similar style homes, if not identical, are best.  But capes comp well with colonials.  Bungalos with cottages and small ranches, etc.

If there's not sufficient market data, I slowly push out both time and distance until I have at least 3 comparables.  These are actual history as they have already sold.

The bottom section is "on the market now".  These prices could be fantasy land, but at the very least, it tells my client what the competition is doing.

Across the top (column headings) are all the things that determine the relative value of a home.

The dream situation is to run comps on a townhouse in a row of identical town homes in the same complex that have just sold.  I can run those in 5 minutes flat.

When it comes to SFRs, it's almost never that easy.  I sometimes have to use homes across a town line or a different style.  As long as the neighborhood is very close, the beds, baths are identical, acres and square feet are close, you can develop a good understanding of the current market value by going through the process of detailed comparison.

The main rule for me is to never go in with a preconceived idea of what the value is.  Look at the comparable properties and then let those numbers speak.  That way I come up with a value based more on facts than opinions.

Carson Fox · Answer

@Michael Faudoa I am glad I can help. That is what this forum is for.

John Thedford · Answer

yes--adjust to the comp. Yes--you COULD add them together and then get an average. Sometimes comps are weighted because one may be much more like the subject. So, if two of the comps are identical say beds, baths, view, etc...and one has to be adjusted, you might give a 40% weight to the two that are most like the subject and only 20% to the one that has adjustments. Also, generally if SF is less than 100sf difference, many appraisers make no adjustment for size.

Michael Faudoa · Answer

@Carson Fox that was a great comment and very detailed, exactly what I was looking for! Thank you so much for the information. It helps me to see the process a bit more clear.

Michael Faudoa · Answer

@John Thedford so I would add or subtract value from the comparable property, NOT the property I am figuring the ARV for? Would I then just add all 3 of comp's values and divide by 3 to get the average?

How do you estimate ARV?

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