Key Takeaways
- ARV is a projection, and the lender decides the final number. After repair value (ARV) is the estimated market value of a property once planned renovations are complete, and lenders verify it independently.
- An after repair value lender appraisal runs on comparable properties, not your budget. Recent closed sales, similar square footage, and nearby location carry the most weight.
- Most ARV cuts trace back to the comps. Stale sales, oversized comparisons, and over-improved finishes are the usual culprits.
- Use the 70% rule to set your maximum offer price. Maximum allowable offer (MAO) = (ARV × 70%) − repair costs.
- A lower ARV shrinks your loan amount. Lenders cap the loan as a percentage of ARV, so a $26,000 cut in value can leave you with an $18,200 funding gap.
- Stress-test every deal. If the numbers only work at your best-case ARV estimate, the deal is too tight.
You found the deal, ran the numbers, and landed on a strong ARV. Then the lender's valuation comes back $26,000 lower, and the whole deal tightens. For any real estate investor, that moment is frustrating, but it is also predictable. Lenders use an after repair value lender appraisal built on market data, not on your renovation plan or your optimism.
This guide explains how ARV in real estate is verified, why numbers get cut, and how to calculate ARV before you make an offer.
What Is ARV in Real Estate?
After repair value (ARV) is the estimated market value of a property once planned renovations are finished. It answers one question: what will this home realistically sell for when the work is done?
In fix and flip deals, after-repair value drives nearly everything else. It shapes your maximum offer price, your loan amount, and your profit margin. Because ARV is a projection, lenders treat it with caution. They would rather underestimate a future sale price than lend against a number the market never delivers.
How Lenders Verify ARV: The After Repair Value Lender Appraisal
Most lenders do not take your word for it. They order an independent valuation, usually an as-completed appraisal or a broker price opinion, and compare it to your ARV estimate. The process follows three steps.
Step 1: The Appraiser Reviews Your Scope of Work
The appraiser reads your budget and planned renovations to picture the finished home. Vague scopes get skeptical treatment. Detailed scopes, with line-item costs and named materials, carry more weight.
For a lender-ready renovation budget, read How to Estimate Rehab Costs Like a Professional Real Estate Investor and use the checklist in Documents Required to Get Approved for a Fix-and-Flip Loan.
Step 2: They Pull Comparable Properties
Comparable properties, or comps, are recently sold homes similar to yours. Appraisers typically look for sales from the last three to six months, located close by (often within a half mile to one mile), with a similar age, style, and condition. They favor closed sales over active listings, because only a closed sale proves what a buyer actually paid.
Step 3: They Adjust for Differences
No two homes match. The appraiser adjusts each comp for square footage, bedroom and bathroom count, lot size, garage, and finish quality. Many then check the average price per square foot across the comps as a sanity test on the final figure.
Why Your ARV Number Gets Cut
A lower valuation almost always traces back to one of these causes:
- Weak or stale comps. Sales older than six months, or located farther away, carry less weight.
- Cherry-picked sales. Using the single best sale on the street instead of the typical result.
- Mismatched size. A 1,200 square foot comp cannot support the value of a 1,800 square foot home.
- Over-improved finishes. Luxury upgrades in a mid-range neighborhood rarely earn back their cost. Buyers pay for the neighborhood's ceiling.
- Active listings treated as sales. A list price is not a sale price.
- Optimistic renovation assumptions. Counting on work that is not in the scope, or underestimating the renovation cost, weakens your case.
How to Calculate ARV Before You Make an Offer
To calculate ARV, start with three to five recent comparable properties and work in steps:
- Find the average price per square foot of your comps (for example, $185).
- Multiply by the subject property's square footage (1,600 sq ft × $185 = $296,000).
- Adjust up or down for condition, lot size, and features.
That result is your ARV estimate.
Apply the 70% Rule
Next, use the 70% rule to find your maximum allowable offer (MAO):
MAO = (ARV × 70%) − repair costs
With a $296,000 ARV and $48,000 in repairs: ($296,000 × 0.70) − $48,000 = $159,200. That is your maximum purchase price. It leaves room for holding costs (taxes, insurance, utilities, and loan interest), closing costs, agent fees, and profit.
The 70% rule is a guideline, not a law. In competitive markets, investors sometimes stretch it. In slower markets, careful investors tighten it.
How a Lower ARV Changes Your Loan Amount
Lenders offering fix and flip loans usually cap the total loan amount as a percentage of ARV, often in the 65% to 75% range. They also limit funding against the purchase price and renovation cost, so confirm the exact terms on your term sheet.
Suppose your lender caps the loan at 70% of ARV. At $296,000, the cap is $207,200, which covers your $159,200 purchase price plus $48,000 in rehab. Now suppose the lender values the home at $270,000. The cap drops to $189,000, leaving a gap of $18,200 that you must cover out of pocket, or you must renegotiate the purchase price and renovation budget.
These figures are an illustrative example, not a ProLend financing offer or guarantee. Actual leverage, valuation methods, and eligibility depend on the lender, program, and property. For a broader analysis, read How Successful Fix-and-Flip Investors Analyze a Deal Before They Buy. Include potential delays in your reserves using Why Slow Fund Disbursements Are Quietly Killing Your Renovation Timeline.
How to Protect Your ARV Before the Appraisal
- Build your comps like an appraiser would. Use closed sales, within six months, close to the property, with similar square footage.
- Document the scope of work. Include itemized costs, materials, and timelines.
- Share your comps early. Send your comps and renovation plan to the lender before the valuation is ordered.
- Stress-test the deal. Re-run your numbers with an ARV 5% to 10% lower. If the profit disappears, walk away or renegotiate.
- Budget realistic holding costs. Plan for four to six months of carrying costs, not the best-case timeline.
Frequently Asked Questions
What is a good ARV for a fix and flip?
There is no single good number. A deal works when the purchase price, renovation budget, holding costs, and selling costs still leave a profit under the 70% rule, even if the ARV comes in lower than expected.
Do lenders use my ARV or their own?
Lenders use their own. They order an appraisal or broker price opinion and base the loan amount on the lower of their value and any other program limits. Your ARV estimate helps you plan, but it does not set the loan.
How do you calculate ARV quickly?
Multiply the average price per square foot from three to five recent comparable properties by the subject's square footage, then adjust for condition and features.
Can I dispute a low appraisal?
Often, yes. Submit additional closed comps from the same time frame and area, along with your scope of work, and ask the lender to review the valuation. A reconsideration is far more likely to succeed with new sales data than with opinion.
The Bottom Line
A cut to your ARV is rarely personal. It is the lender protecting against the risk that a sale price falls short of the projection. Real estate investing rewards the investor who builds the ARV estimate the way a lender will, then makes the deal work with margin to spare.
If you are evaluating a fix and flip and want a second set of eyes on your numbers, bring your comps and scope of work to the ProLend Capital team before you make an offer. Explore our fix and flip loans, review Our Process, or submit your deal. You can also schedule a conversation or contact us to discuss your appraisal questions.