I'm curious how people estimate ARV. Obviously agents can provide an ARV, but I've noticed some fairly wide discrepancies. I would like to be able to do some of my own math rather than just trust agents who I haven't worked with in the past (and therefore I don't know how accurate their estimates turn out to be). Especially on off-market properties that an agent brings to me, they may be representing the seller too and have an extra incentive to present an ARV on the higher end, and I can't necessarily go and ask another agent to calculate ARV for me when they wouldn't be involved in the deal. Not trying to sound cynical, just trying to do my due diligence. Thanks!
Elliot, your instinct is right — run your own number and treat any agent's ARV as a claim to verify, not a fact. My method is sold comps only. Pull houses that actually sold in the last six months, same neighborhood, same ZIP, similar beds, baths, and square footage. Ignore list prices and ignore Zillow — neither one ever bought a house. Then adjust for condition: a comp that sold fully renovated is your ceiling, and you back out the rehab difference between that house and yours. When the sold comps cluster, that cluster is your ARV. On my Memphis BRRRR deals that lands between $180K and $265K. If only one high comp supports the number, the number is wrong.
Elliot, your instinct is right — run your own number and treat any agent's ARV as a claim to verify, not a fact. My method is sold comps only. Pull houses that actually sold in the last six months, same neighborhood, same ZIP, similar beds, baths, and square footage. Ignore list prices and ignore Zillow — neither one ever bought a house. Then adjust for condition: a comp that sold fully renovated is your ceiling, and you back out the rehab difference between that house and yours. When the sold comps cluster, that cluster is your ARV. On my Memphis BRRRR deals that lands between $180K and $265K. If only one high comp supports the number, the number is wrong.
Elliot, you're asking exactly the right question — ARV is where most new investors get hurt. As an agent, here's how I'd build it: sold comps only, last 3-6 months, same neighborhood or subdivision, similar bed/bath count and square footage (within about 20%). Then adjust for condition honestly — a fully renovated comp is your ceiling, and you subtract the cost difference between that finish level and yours. Ignore list prices and online estimates; neither has ever closed a deal. The best move is asking an investor-friendly agent for a CMA on the property as if it were renovated — it costs you nothing and puts a professional's comp selection behind your number. When your sold comps cluster tightly, you've got your ARV. If one high outlier is carrying the number, be skeptical. Are you analyzing a specific property right now?
Can you have a buyer agent that you rely on? In my state solds are hidden on Zillow. You can use Propstream to analyze comps nearby. Definitely verify comps and ask for their proof(they should be able to provide a link with comps).