Updated After Repair Value (ARV) Tips

Posted By: Derek Marlin ICOR Blog & News ,

              It’s critical to develop a consistent system for evaluating what a rehabbed property can sell for as we head into 2022. While this process is never an exact science, it’s important to base decisions on the data of recently sold, pending and active properties. Many investors base their ARV around personal tastes on the finishes of a home or if they went over budget that pricing a property above the comps is justified. One unique challenge we see in the current Denver market is determining ARV based on sales prices which closed significantly over asking price. Coming out of the early spring season and through most of the summer homes in metro Denver were consistently selling for $50,000-$100,000 over asking price! I even saw one property in Littleton which sold for $300,000+ over asking and the buyers paid with cash! So, the “million dollar” question is how the heck do you use these sales prices to comp a prospective property? At ELEVATION, we’re always proponents of providing the investing community real time guidance on these issues. Here are some quick tips for setting ARV:

  • % OVER ASKING PRICE
    1. 1%-5% over asking price should still be safe to use as a comparable sale for similar properties
    2. 6%-10% over asking price needs a much more detailed analysis as to why the price ran up and setting your ARV on the more conservative side of similar properties would be a wise bet
    3. 10%+ over asking has us taking an average of the listing price and the sold comp price to determine our final ARV or listing price

              For Example, if a property is listed for $500,000 and sells for $580,000 then we’d price the property at $540,000.

 

  • FIRST LEVEL COMP ANALYSIS
    • Bedroom & Bathrooms: Try to find the number of beds & baths but also look at +/- one (1) bedroom and bathroom sized properties
    • Square Footage: Search within 300 SF larger and smaller than the subject
    • Garage: Does the subject property have off street parking vs. a two-car garage
    • Property Style: Ideally find the same style as your subject property. A ranch and Victorian home are not the same and shouldn’t be priced as such
    • Condition of property: We score properties follows:
      • As-Is
      • Homeowner (+ & -)
      • Fix & Flip (+ & -)
    • Location: Search within a quarter mile and watch crossing over major roads into other neighborhoods
    • Age of property: Finding a subject property within 10 years of your comps is ideal but not as important as the style of the home

KEY TAKEAWAYS

              It’s best to be conservative in determining your ARV so that it gives you the best chance for a profitable rehab project. Always search out fellow investors and experts to double check your analysis before going on market. We’re always here to add value to investors so don’t hesitate to reach out!

 

Derek Marlin

CEO

ELEVATION

720.545.0490

info@elevationinvest.com

www.ElevationInvest.com