Question about the After Repair Value

[Victor Matias]

Hello everyone,

I am new to the investing world in Real Estate and I have a question, when determine the ARV, do you go by the price of the last sold comps or by price by sqft? I explain, do you take the highest priced comp similar to your subject property as your ARV or do you take all the comps applicable to your subject property and divided by the number to get your price per sqft and determine the ARV?

I see different opinions regarding this and I'm a little bit confused.

Thanks in advance! 

[Andy Sabisch]

The ARV of late is an elusive number to say the least.  With the market in flux, a sales comp from 6 months ago may be a wish at best.  The March-April 2022 time frame was the peak in most market.  As interest rates started to rise, the buyer pool started to shrink and prices started to drop.  Be careful of the time frame you look at comps from . . . especially if someone is giving them to you to justify a sales price to you.  I have gotten wholesalers send me deals with comps that are clearly from the boom days of 6+ months ago and the current market would not support them.

If you use price per sq. ft, be sure you are comparing apples to apples and not bananas.  The comparison properties should be around the same sq ft and about the same condition.  If you have a 1600 ft2 3/2 that you have rennovated, comparing it to a similar size yet in need of a reno or a 3,000 5/3 is not going to give you a good number.

Look at sites like Redfin (if they cover your area) or one of the tools here on BP.  Be careful about the Zestimate on Zillow as those numbers at times seem like someone is using a random number generator.

Hope this helps