How do you calculate ARV?
Find three to five recent sales of similar renovated homes close to the property, adjust each for meaningful differences such as size, bedrooms and condition, and average the results. The result is your ARV estimate.
Stronger comparables are closer, more recent and more similar. When the sales disagree widely, find out why before trusting the average.
How to do it
- Choose sales that closed in the last three to six months, within about a mile, with similar size, type and age.
- Use renovated, retail sales, not distressed or investor purchases.
- Adjust for differences such as square footage, bedrooms, bathrooms and lot.
- Average the adjusted prices, or weight the closest and most similar sales more.
- Sanity-check the result against the neighborhood’s price range.
Common mistakes
- Averaging comps of very different sizes without adjusting.
- Including distressed sales in a renovated-value estimate.
- Ignoring a wide spread between comps instead of finding out why.
More questions
Should I use price per square foot?
It is a quick check when the comps are similar in size and condition. For homes that differ, adjust for bedrooms, bathrooms, lot and condition instead.
What if there are no recent comps?
Widen the time window or distance gradually, and adjust more for the differences. Be honest with buyers that the ARV rests on older or farther sales.
Should I use the median or the average?
With three to five good comps, either works; the median resists one unusual sale better. Weight the closest, most similar sales more.