How do you determine ARV?

Question

I'm curious how y'all determine ARV (After Repair Value) in your area.  I'm looking at some foreclosure's and the hardest part seems to be what they would be worth after repairs.  I have a great estimating software to give me the actual cost to rehab, but have no idea what it could or should be sold for once finished.

Do you have your realtor pull comps and base it of a price per sf?  If so, do you use an average, lowest, etc???
I've been using comps then base it off the price per square foot they sold for.  I usually figure conservative for worst case scenarios.

Another question, is there any place or software or site to determine what a property will appraise for?  I'm wanting to see the appraised value "as is" before any repairs....  Id like to be able to do this before I buy the property.  Of course I would hire an appraiser once I made my choice and get a professional decision....

Ryan Webber · Answer

I use comps from a realtor (or rather MLS access from a realtor) to determine the average price per square foot in that area. I use the average and take into account if its over or under built, if its on a major street, if its odd for the area, and anything else that may change its value versus the comps.

Appraiser use comps from the MLS to determine value. Now their process is quite a bit more thorough, but they still pull their actual comps from the same MLS that realtors use.

Appraiser use comps from the MLS to determine value.  Now their process is quite a bit more thorough, but they still pull their actual comps from the same MLS that realtors use.

Ryan Webber · Answer

I have never seen appraisers software but I would guess that it exists.  I know that they have a value book that will give regional values of certain amenities.

I would have to disagree that "comps" or comparative sales are ranging that much.  That is a 50% fluctuation, which tells me that they are not all comps.  Figure out which ones your house is most similar to in reference to location, size, design, amenities, age, condition, etc.

Being conservative with $80 a foot is probably a safe thing to do, but understand that it is not an accurate ARV.  I personally want to know an accurate ARV.  I want to know what it will sell for.  Now I am conservative on that estimate, but dropping it blindly 20% is a little over conservative.

N/A N/A · Answer

Ryan Webber - The $80/ft is what I'm figuring it is worth before rehab or before the ARV.  With comps in the area that have been rehabbed or are in good shape are selling for $105 - $150/sq ft.  I hope to be in the middle of this or above.  The purchase price is $47/sf.  I hope this didn't confuse you.  I jump around sometimes.

SteveGent - I use Xactimate 24.  Its an estimate software used by insurance adjusters and contractors.  I'm an adjuster.  I'm usually off 4-6 months a year so I figure this would be a great way to make the time pass and make some extra money.  The software is a little tricky to use at first, but once you get the hang of it its awesome.

Shalonda Guillory · Answer

You can also look up in the county of the property to see what they appraise it for or its current value. For instance, in Harris county, Houston TX www.hcad.org you can find the current value of the properties you are looking to purchase.

N/A N/A · Answer

you do need to pull comps from mls etc.  and you take into consideration the distance from the subject property, square feet, year built, bed and bath, and style.  when you are lookign at comps the ones at the lower end that meet the above criteria should be about what your house is currently worth, as they are probably in a similar condition.  the comps that meet the above criteria and are in the mid to upper end of the comps are what you are shooting for on an ARV.  As they will most likely be the houses that are in the condition that your house will be in after x amount of repairs.  It is still a fine line and you have to know the area so that you can determine if any of those comps are fraud or not.  You should probably throw out any outliers that are really high to get an accurate ARV.

N/A N/A · Answer

Hi,

Whats the software that you use ?

Thanks

Ryan Webber · Answer

"As-Is" appraisals in my experience usually just take into consideration the repairs needed.  For example if the house comps out at 100K and it needs 10K in repairs to get there, then an as-is appraisal will come back at 90K.

Again, I would determine a more accurate ARV then the $50 a foot range you have.  That is a big spread, and there is a reason that one house sells for $105/ft and another $150/ft.  Figure out what the difference is and fit your house in there accordingly.  "Hoping" to be in the middle of something that open is risky at best.  An accurate ARV can be determined within 5% or so very easily.  Leaving that much room for error can prove disasterous when you go to sell.

N/A N/A · Answer

Thanks!!!
Do appraisers us a software as well?  What do they do when they go to the property?  Do they take measurements, take age, condition, etc into consideration?  I'm sure they do, I just have never meet with one or saw them work.  The comps in the are are selling or sold for $107 - $150/sf.  Do you think I would be safe figuring $80/sf?  If it appraised for that as is, I could buy the home, then have enough for repairs.

How do you determine ARV?

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