Glossary
After repair value formula
The after repair value formula is: ARV = the sale prices of renovated comparable homes, each adjusted for its differences from your house, reconciled into one number. A safe default is the lower of the weighted average and the median.
There is no single multiplication that gives you ARV. It is an adjusted average of real sales, the same way an appraiser builds a value.
The formula, in three steps
- Pick the comps. Three to six recent, arm's-length sales of renovated homes near yours, similar in size, beds, baths and age.
- Adjust each comp. Adjusted price = sale price + time + size + bedroom + bath + garage + condition adjustments. Add when the comp is worse than your house will be, subtract when it is better.
- Reconcile. Weight the closest, most similar comps most. Compare the weighted average with the median and use the lower one if you are unsure.
- Comp sale price
- $310,000
- Time: 4 months x 0.25% x $310,000
- +$3,100
- Size: 100 sq ft x $84 (40% of a $210 median price per sq ft)
- +$8,400
- Baths: a second full bath instead of a half bath
- +$4,000
Planning numbers. Adjustment amounts vary by market.
Price per square foot is a shortcut, not the formula
Median price per square foot times your square footage is a quick check, but it overvalues bigger houses and ignores condition. Use it to sanity check the adjusted comps, not to replace them.
The full method, with the comp filters and adjustment table, is in how to calculate ARV for a flip. Try it with numbers in the flip calculator.
Questions
What is the simplest ARV formula?
Median price per square foot of renovated comps times your square footage. It is fast but rough; adjust real comps before you make an offer.
How many comps do I need for ARV?
Three is a minimum and five or six is better, all renovated, recent and close by.
Written by Austin Frangoules | Updated
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