How to estimate after-repair value before you offer

After-repair value is a finished-house price

After-repair value, usually shortened to ARV, is the resale price you expect once the renovation in your scope is done. Every offer formula that starts with ARV, including the 70% rule, inherits whatever bias you baked into that price. A high ARV makes a bad purchase look safe. A low ARV makes you miss houses you should have bought.

ARV is not an appraisal. Appraisers follow professional standards such as USPAP and, when a lender is involved, selling-guide rules. Your investor memo can borrow the same habits without pretending to be their report. It is also not the list price, the tax assessment, or the price you need in order to hit a profit target. Those are different questions. If you need the profit target to make the value work, the value is wrong.

Keep three numbers on the file and refuse to blend them:

• As-is value. What the house would sell for today, in its current condition.
• After-repair value. What a similar house sells for after a renovation like the one you will actually deliver.
• Your offer. A price that still works after repairs, financing, holding, and selling costs. Calculate it with the maximum offer calculator after the ARV is set, not before.

Choose comps the way a careful appraisal does

Fannie Mae's selling guide section on comparable sales tells appraisers to use sales with similar physical and legal characteristics: site, room count, finished area, style, and condition. It expects at least three closed sales, prefers the subject's market area, and asks for an explanation when the search has to move farther out. Those rules govern many mortgage appraisals. They are a sound screen for a flip even when you are paying cash, because the eventual buyer's lender may hire the appraiser who has to defend a similar set.

The companion section on adjustments is the part investors skip. A larger house, an extra bathroom, a garage, a busier road, or a seller concession changes the price. If you cannot say what the adjustment was and why, you do not have an adjustment. You have a thumb on the scale.

What to throw out

• Sales in a different city when the street names match but the markets do not. Holbrook and Northampton are not the same comp set because a street name repeats.
• As-is or wrecked sales when your ARV assumes a renovated kitchen and baths.
• New construction when you are delivering a renovated older house, unless you adjust for that and explain it.
• One ultra-luxury sale that has no peer in the subject's city.
• Listings that have not closed, except as a check on where sellers are aiming.

Condition has to match the house you will deliver, not the house you are buying. If the comps are renovated and your scope is paint and carpet, you are using the wrong ARV or the wrong scope. Fix one of them before you offer.

Worked example: three comps, not an average of the block

The subject will be a renovated 3 bed, 2 bath house of about 1,500 square feet. You have three closed sales from the same market area in the last nine months. Figures are a teaching set, not a live market.

Comp A is the anchor. It matches condition and size. Comp B supports the neighborhood but is larger, so you do not copy $328,000 onto a 1,500 square foot house. A rough size gap of 120 square feet, if similar renovated sales in this file trade near $150 a foot, is on the order of $18,000. That pulls B back toward $310,000. Comp C is not an ARV comp until you add the cost and risk of bringing the kitchen to the same finish. Using it raw drags the average down and makes you look conservative while actually mixing two products.

The unweighted average ($308,000) and the renovated indication ($312,000) are close here. They will not be close when one distressed sale or one larger house enters the set. Write the sentence you used: "ARV $312,000, weighted to the renovated 1,480 square foot sale, with the larger renovated sale adjusted for size." That sentence is the underwriting. The average is not.

Scenario: Dana almost offers on the average. Dana adds a short sale from the next town because it is recent. The average falls to $292,000 and the deal looks safer, so Dana raises the purchase price to "use the extra room." The short sale was a different condition and a different market. The room was never real. Dana deletes the comp, puts the ARV back at $312,000, and lets the flip profit calculator show whether $210,000 still works after repairs.

Three decisions that depend on which value you meant

Cosmetic flip

You will deliver the same finish as Comp A. Use renovated comps, subtract a concession if Comp A gave the buyer $6,000 at closing, and keep the scope consistent with that finish. Then run the offer. On a $312,000 ARV and a $45,000 scope, the 70% screen is $312,000 × 0.70 − $45,000 = $173,400. If the detailed cost stack is heavier than that cushion, the detailed maximum is the number you defend. The deal analysis screen is where financing and holding time show up.

Heavy rehab with no finished comps

Scenario: Luis has a gutted house and three pretty averages. Every nearby sale is a dated but livable house. None of them is the renovated product Luis plans to sell. He can widen the search and explain the distance, or he can say the ARV is not supported yet. Inventing a $40,000 "finish premium" with no paired sale is how rehab budgets and values get double-counted. Until a renovated comp or a broker price opinion with named sales exists, Luis's offer stays at the walk-away he can fund if the ARV comes in low.

BRRRR refinance value is not the flip ARV

Scenario: Priya uses the retail ARV for the refinance. Her flip comps say $400,000. The lender's rental appraisal, with different condition ratings and a different use, comes in at $360,000. At 75% loan-to-value that is a $30,000 hole in the cash-out she promised a partner. Priya should have stored two values on the property: resale ARV and refinance value. The BRRRR guide and the BRRRR calculator only help if those inputs are not copies of each other.

Checklist you can use without an account

1. Write the finished-house description your scope will actually deliver.
2. Pull at least three closed sales from the same market area, preferably inside a year.
3. Drop sales that do not match condition, beds, or property type.
4. Adjust size, lot, concessions, and condition in words and dollars.
5. Set a point ARV and a low case. Offer math uses the low case when you are unsure.
6. Do not floor the ARV to the cheapest sale just to feel careful, and do not lift it to the highest sale to make the offer work.
7. Recalculate the maximum offer and the profit. If either fails, change the price, the scope, or the decision.
8. Save the comp notes on the property so the number is still explainable at the listing appointment.

Rehabfolio's property research can draft comps and a value from public sources. You still do this checklist. Nothing in the research memo is saved as your number until you accept it. A worked public example of that correction sits in the sample deal report.

When you want the category of software that holds this file through the rehab, the underwriting software page describes that job. If you are comparing calculator sites, start with Rehabfolio vs BiggerPockets and the comparison hub.

Sources

• Fannie Mae Selling Guide, B4-1.3-08, Comparable Sales. Selection, market area, and the three-closed-sale minimum used in many mortgage appraisals.
• Fannie Mae Selling Guide, B4-1.3-09, Adjustments to Comparable Sales. Why a comp price is not usable until differences are addressed.
• The Appraisal Foundation. Publisher of USPAP, the standards appraisers follow. An investor ARV screen is not a USPAP appraisal.

This guide is education, not an appraisal, a brokerage opinion, or permission to skip local MLS rules.

Frequently asked questions