What is an ARV and how does it relate to my home price?

When you hear "ARV" from a savvy real estate investor, do not be intimidated. The ARV is an acronym which stands for After Repair Value. There are a few ways to get to an ARV number or price, I personally like to base the ARV on what the best looking house on the block sold for in the last six months. Off course that house has to be somewhat comparable to your house or the house you are trying to buy. If your house has three bedrooms, two bathrooms, is about 1200 square feet and the best looking house on the block that sold for $500,000 is a four bedroom, three and a half baths, is about 2,200 square feet, with a brand new roof; then obviously you can't ask for $500,000 when you haven't done any repairs to your roof. This blog is not just about numbers, I hope I can shed some light to homeowners looking to sell their home Off Market, meaning they are not listing their property with an agent because they really need to sell fast without the hassle of going through the motions and waiting for months to get their house sold. Let's dig into why certain houses in the market sell for what they sell for.

Comfortability

Comfortability can mean many things for different people, I have a strong assumption that comfortability means can I see myself living in this house or community for a very longtime. That can translate to, for example: a family with small children seeking B or A rated schools. I come across many sellers who are proposing outrageous prices for their home and not factoring in the fact that they are in a D rated school area. Now off course, you are going to have some buyers who don't care about school ratings but the majority of home buyers in the market are more family oriented and they tend to factor school ratings in their decisions.

Up Grades or Updates

You don't necessarily need the what I call "Bells & Whistles" in your home to get top dollar for it but generally speaking people like nice things in their home. Stainless steel kitchen appliances with porcelain tile back drop is a lot more enticing than your basic white kitchen appliances with linoleum flooring. The more open concept the kitchen is, the more appealing it is to would be buyers. The way the bathroom looks can also make a difference in how your home is priced as it relates to the ARV. Plastic cover showers is so 1980's; It does not compare to large stone tiles, with cascading rain drop shower heads and sliding glass shower doors. These types of updates gives the house a sort of wow factor that makes the potential buyer feel like they can see themselves taking a shower in this bathroom or preparing meals for the family in this kitchen.

Mitigate future headaches

Most buyers like to have that peace of mind that certain critical things in the home will not be breaking down in the not too distant future. A new roof with certified warranty for 10, 20 years is such a relief for the buyer and a strong selling point. Newly placed or re-built HVAC, removing outdated copper plumbing and replacing them with new PVC pipes, property has recently been treated for termites, all of these things gives buyers a peace of mind that assures them that they have a sound investment.

In closing, there is a lot that goes into determining a fair price for your house. Comfortability, Updates, and Mitigating future headaches cost money. As investors, we have to pay for all of those things upfront without the guarantee of making a profit. Understand that Off Market means that you are willing to sell your property at a discount because you have a pressing problem or a lingering problem which happens to be a house. There are people out there such as myself who are looking to buy houses that are old, in need of repairs, or just sitting vacant. We would do a market analysis and part of that analysis would include determining the ARV in order to give you a fair offer price for your home.