How to determine ARV?????

Question

Hi All! My question is how to set the value of a home after you make repairs. I have been looking at sold/active/pending comps on different properties and they are all over the place. Any advice is appreciated since I am new to all of this! Thanks in advance!

Jon Holdman · Answer

Lizshawna, Another option is a broker price opinion (BPO). Similar to an appraisal, but done by a real estate agent rather than an appraiser. Maybe no charge if you're thinking of listing the property with the agent, or if you have a working relationship. The appraisal will be more detailed, and should be more accurate. All those assume you have a house you're ready to sell. If you mean you're looking at fixers to buy and rehab, its a little more complex. You probably don't want to drive an agent nutty doing multiple BPOs and you certainly don't want to pay $400 for every house you consider. If this is your situation, you need to get out and get to know the area you're working. Go to open houses, look at listed houses, and talk to agents. There are various sources of data, including agents, title companies, public records, and even online services like zillow. Once you've looked at enough properties in an area, you'll get a feeling for what properties sell for, and be able to come up with a pretty accurate estimate yourself. That will allow you to determine which properties are worth taking to the next level and doing a BPO or an appraisal. Jon

Chris Zabaleta · Answer

I know that Zillow is customizable, you can input any upgrades you plan to do to increase the value of the property. This should be ok to give you an idea of which properties you want to move on. Once you have narrowed down your search, you should get a more accurate opinion such as a BPO or an appraisal. Also you may want to consider consulting with a hard money lender as we usually lean towards the conservative side. If a hard money lender will fund your deal, it's probably a deal worth pursuing.

Michael Shadow · Answer

Spend the $400 or so and have a licensed appraiser come out and appraise the house. The $400 will be paid for by the sale price. It will either prevent you from listing it to low and not getting as much as you could, or it will also prevent you from listing it to high and having to pay holding cost for 3 months or *YIKES* even a year or so. Once a property has been on the market for some time people will start to get dull to it and then when you reduce the price to the market price it may even have to go a bit lower to get someone interested in it. The little bit of money spent upfront on an appraisal will more than pay for itself.

Vernon B · Answer

Comps can be all over the place especially if you are investing in urban areas, where one block could be reviatalization area and the next be crime ridden. You must pick through the comps list that you recieve from your Realtor and find houses that are as similiar to yours as possible. You also want to look at the trend over the last year for house prices in that area. This market is difficult to price when house values are decreasing every month in some areas. If there has been a 12 percent drop in prices over the last 12 months and you know it will take you 4 months to finish the rehab, you may need to base your ARV 4 percent lower to be safe.

Elizabeth Einecke · Answer

My limited experoience has been that realtors are very happy to provide you with comps. I also subscribe to SiteX which provides property reports/comps for a monthly charge. You might also establish a relationship with a title company. They may be able to provide you some help.

Ryan Webber · Answer

To figure an ARV, I prefer to use comps from sold listings and determine a Current Market Analysis (CMA), which you can have a realtor do for you also. A BPO and CMA are essentially the same thing but I've only heard of it being called a BPO when a realtor is dealing with a lender. Now you said your comps are all over the place, and my first thought is then they are not true comps. There is a very strong chance that there is a very logical reason for the large differences in price, and it is your responsibility to know why that is. Is it differences in size, bedrooms, bathrooms, neighborhood, or condition? There is something that makes someone pay $80 a square foot for one house and $120 a square foot for another, and you need to know why. You may need to go intimately learn that area as Jon shared with you. If you are serious about this business you should have your "farm" areas that you know like the back of your hand.

Calixto Urdiales · Answer

There are many things you to do but in this case the most accurate thing to do is get a value check! Just let the appraiser know what was added on and they should be able to do it for you! Thanks for your time and have a wonderful biggerpockets day!

Michael Price · Answer

@Chris Zabaleta, Good Evening Chris, Quick Question, do you know of any great hard money lenders here in Central florida that work well and close with first time rehabbers, such as myself. I am finally making a move to do some rehabbing myself and I need some help, advice and some credible sources to go to that can and are willing to help me. thanks

Michael J. · Answer

If you use comps to determine the ARV, I'm sure the easiest is to use a Realtor but other than that what is the best way to get comps in an area? My problem is I am researching possible properties but until I am ready to go I don't want to bother a Realtor so it would be good if there was a way to get comps without a Realtor. Some obvious ways that I can think of is pull up records in the court house for properties that have sold in the area and try to pick out the ones that are similar to your property, use Zillow, Zillow is great but there are not many properties listed in my area. Any other ideas?

Calixto Urdiales · Answer

Hey there Liz after all the feedback what route do yot think is best for you? And I hope everything goes well with the realtors!