ARV?

[Account Closed]

How do you calculate the ARV on the property?

[Jon Holdman]

There was a thread on this a while back, but I couldn't locate it with a quick search. You might try some searching, and you may find it.

Webweaver is correct that for single families the value is determined by comps. If you can find recent, nearby sales of comparable properties, those will define the price for the one you're trying to evaluate.

So, there are two parts to the problem. One is getting the data. The other is determine what constitutes a comparable.

Data sources are different in different areas. Around here, the MLS contains sold data and includes information about any seller concessions. It does only contain properties sold via the MLS, though. Public records contain more data, but doesn't contain the concession information. Only a real estate agent can get data from the MLS. So, you'll either need a relationship with one or you'll need to become one. Some counties have very up to date data on web sites. Others require a trip to the courthouse. We have a listing here. Some are very quick to update their web site (like the same day as the recording) others are very slow (like a year.) Title companies often have online systems to get data and those are usually very up to date. Call a few and ask about getting access to their data.

With markets falling, or if they were rising quickly, you want very recent sales. Ideally under 90 days. A sale from a year ago is only useful as a historical reference point and has little to do with the current value.

The second question takes more work. You have to figure out where neighborhoods are. Where are the dividing lines. What houses are really similar to other house. Here there's no substitute for looking at a lot of houses in your farm area. Many years ago when trying to buy in a new area we were working with an agent who could describe almost every house as we were driving by. She focused exclusively in that particular area. I was quite astounded at the time at her knowledge level. I realize now an investor really needs that knowledge level. You get it by looking at as many houses as possible. Certainly you want to drive up and down every street in your farm area. Look at the inside of as many as possible. Unless its an area where there is a lot of variation, you'll begin to recognize patterns. Knowing what houses have sold for, and looking at those and similar houses lets you get a really good feel for what various houses are worth. Given enough data points, you should be able to to look at a house from the street, know its specs (beds, baths, size, age, etc.) and be able to come very close to the value.

Zillow's useful for finding nearby comps, though its not that complete. Its also useful for finding exact addresses. I wouldn't trust its values, though. They seem to vary a LOT.