OfflineI am having some trouble determining what the difference is between Fair Market Value (FMV) and After Repair Value (ARV). Just need clarification as I see FMV as what the property is worth As-Is and ARV as what the property is worth once fixed up. Is that correct? If so, how is the FMV determined?
The other piece I need to understand is what the best solution is to making offers on REOs? Is the ARV formula better (ARV * XX% - Repairs - Wholesale fee) or FMV (FMW * XX%)?
Thanks in advance for the help.
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This is how I use FMV and ARV. When I look at REO's, I first look at FMV. How much are houses selling for in the current market? Then I look at the house I'm interested in and see where it falls in that market. ARV is after all repairs what is the highest amount you can get for the house in the current FMV. Honestly, all the formulas etc are kind of thrown at the window during this crazy market. A lot of us are making offers 40-60% off the asking price. I think as long as you can have some equity in the deal (at least 20% after repairs and your fees) and the house can cash flow. You've got a good deal. The more equity and cash flow the more buyers you're going to attract to the deal. I'm not even visiting house until I get an offer accepted. I'm offering 40-50% off on houses. If an offer is accepted then I drive out to the house real quick, look at what the house needs.