What does After Repair Value (ARV) mean?

What does After Repair Value (ARV) mean?

The After Repair Value (ARV) estimates the future value of a distressed property after it's been repaired or improved.  ARV is commonly used by fix and flip investors who purchase, renovate, and sell properties within one year. A property's after repair value includes both its purchase price and the value of its renovations although sometimes not dollar for dollar.

Agents will need to do their homework to determine what is the top price a property can capture in the neighborhood AFTER it’s been renovated and is in pristine condition.  This will be your benchmark for some quick math based on the "Formula" in the buy box to evaluate properties BEFORE submitting to an iBuyer for consideration.  This will also allow you to set the correct expectations for your seller based on receiving what will most likely be a discounted offer.

During the submission process, agents should upload at least 3 sold comparables to support their opinion of ARV.  You should indicate the estimated asking price if the seller has conveyed that information as well as your opinion of as-is value.  Some of our investors do not have 1st hand neighborhood knowledge as you do, so your chances of a solid offer increases as you provide them with supporting documentation as to your opinions of value.

Key Takeaways
  1. ARV (after repair value) estimates the potential value of a property after all repairs have been made.
  2. After repair value is used by wholesalers, fix-and-flip investors, and property owners to determine the potential profit on renovations and updating.
  3. Conducting a comparative market analysis and accurately estimating the cost of repairs are two key parts of accurately determining ARV.
  4. Many investors use the 70% Rule with ARV to determine the maximum purchase price of a home that needs to be renovated.

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