OfflineHi!
I am getting ready to make some offers on some REOs to wholesale -- but I think I am getting confused with my terminology and its application.
I understand that ARV stands for After Repaired Value, BUT, does ARV take into consideration the value of the comps for the area?
In other words, should I make my offers based on <70% - less repair costs - of the average of the comps?
The clock is ticking on my offers so I need some advice quickly!
Thanks!
Sean
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Sean
Negative people are like cancer. They'll eat you alive unless you irradiate them out of your life.
In short yes. Think of the ARV and FMV as the same thing. Once you get comps. run your numbers based on the what the comps. tell you the market value is.
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Yes, The ARV will come from the comps(sold) take say 5 or six, if available and get the average price per sqft and this is your FMV (to me it means what is someone willing to pay for it) of the subject property. Then you subtract all the costs to get to MAO ( MAX OFFER) This would be the line in the sand, you can't go passed to make it profitable for you. I would say start the offer 4K-6K under MAO so you have some negotiation room.... ARV is just that AFTER repairs have been made. Knowing the FMV around the subject property is a must. Don’t forget to subtract your profit, closing cost, RE Agent fee, repairs needed, and a little extra if not sure. Make sure to KNOW WHAT YOUR BUYERS want in order to make a deal work.
I'm sure the seasoned guys/gals here will elaborate more on this subject...
Meanwhile awesome that you are taking ACTION!
Joshua
All the answers are great! Thank you!
However, I have another question. What do you do when the list price of the home is LESS than the comps in the area. Do you base your computations off of the list or the comps?
Thanks!
Sean
Negative people are like cancer. They'll eat you alive unless you irradiate them out of your life.
Sean,
Buy it ! No really,
many homes will be listed less than retail comps. You need to look at 2 different sets of comps. First get comps of the properties that were distressed sales-REO,short sales etc. Than get comps of the homes that sold that were in good -move in condition such as investor fix and flips as these are usually sold at the higher end . Knowing the retail comps of the move in condition properties will give you the ARV(after repair value)
Good luck!
John W
John and Julie Wakefield
JCW Properties, LLC