what does after repair value mean in real estate

What Does After Repair Value Mean In Real Estate?

what does after repair value mean in real estate investingWhen you are swimming through the world of investing, you may hear the term referred to quite frequently: “after repair value” also commonly referred to as “full market value” or for short “ARV”.  If you aren’t familiar with investing, you may not be sure what this term means, so we are going to explain it here in this article.  We are a local home buying company HBR Colorado that purchases homes fast using our own cash in order to rehab houses and then resell them on the open market.

Any given property’s After Repair Value is quite simply the estimated full market value of the home if it were to be sold at it’s highest value on the open real estate market.  The way to determine a homes after repair value is to look at recently sold homes in the same county, neighborhood, and subdivision that have the same exact square footage, and number of bedrooms and baths.  It’s also a good idea to find homes that were built around the same time period, and have the same style of build and / or floor plan.  This can help narrow down your search quickly, so that you can determine a highly accurate number in a limited amount of time.

One Good Comp Is Better Than Ten Bad Ones

Remember, one highly accurate comparable property is much better than a dozen properties that aren’t that similar to the subject property that you are trying to determine the value on.  So this is the time to get picky with your comps, and only allow stuff through the gate that matches up perfectly with the property that you are analyzing to determine the value for.  Make sure to use a recently sold property that has a square footage that is within at least 500 feet of the square footage of the subject property, this way your number will be much more accurate than if you used homes that were much larger or smaller.  This is the common rule of thumb when valuing comps, so please keep this in mind and you should do great in your future endeavors.

Investors Will Pay A Percentage Of ARV

The main reason why investors such as us are always discussing after repair value, is because that is the number that we use to determine how much cash we are going to offer for a specific home.  Our standard formula is to take 70 – 80% of the ARV and then subtract out the estimate repair costs, and any other fees that will be associated with the closing of the property.  We will then use that number to formulate our final offer, which we will then present to the seller in verbal, written, or contract form, and allow them some time to think it over.

Once the seller has thought about our offer, and considered it for a long enough time to make a decision, we will typically either hear back directly from them or we will reach out to them ourselves to ask the final verdict.  If the seller decides that they would like to move forward with our team and our home buying services, then the next step is to sign the contracts and get them over to a local title agency in order to set the closing date.

For more info on selling your home for cash for a percentage of the ARV please feel free to read http://www.hbrcolorado.com/i-buy-homes-for-cash-in-denver-colorado/

What Is The Advantage Of Selling My Home For Less Than The ARV?

The main advantage of selling your home for less than it’s actual value is speed and flexibility, and the ability to sell without having to make repairs.  The thing about listing your home on the open market through a licensed agent, is they are going to want you to perform a series of repairs on the home before it’s even qualified to get listed on the open MLS, and that is going to take both time and money.  If you are in a tight spot, you may not have the time or the funds available to fix the house up to it’s highest value, and then pay the closing costs and listing fees on top of everything else.

All of these monthly costs start to add up and become an increasing strain, which is why a lot more people these days are choosing to sell their homes quickly to investors in order to liquidate their properties fast without having to go through the stressful process of repairing and listing their home, and then showing it to a string of buyers over the course of several months before someone qualified finally ends up pulling the trigger.  Selling at a 20 – 30% discount in one week without having to make repairs, clean anything or even remove any trash sounds pretty good right about now, doesn’t it?!

Call Us Now at (719) 286-0053 or fill out the quick form below to get started.

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