After-repair value (ARV) is the number that makes or breaks a fix-and-flip — and the number most investors get wrong. Lenders underwrite to your ARV story, but appraisers underwrite to sold comps. When those diverge, a file that looked fully funded on cost can be cut to the 75% ARV cap overnight.
This guide explains how to build a defensible ARV before you request proof of funds or submit an offer. The full comp-and-adjustment method is in how to calculate ARV. For leverage mechanics once ARV is set, see understanding LTV and LTC and our fix and flip programs.
What ARV actually means
ARV is the expected market value of the property after you complete the rehab scope you plan to fund — not today’s as-is value, not the highest Zillow “zestimate,” and not what the listing agent hopes a bidding war produces.
Hard money and fix-and-flip lenders use ARV to cap loan-to-value after repair. Typical structure:
| Leverage test | Based on |
|---|---|
| Up to 100% of cost | Purchase plus rehab on a qualified file |
| 75% of ARV | Hard cap — fund the lower of cost and this test |
| Exit margin | ARV minus all-in cost minus carry and selling costs |
If ARV is inflated, you overpay on acquisition or underfund rehab — both end in extension fees or a short sale.
The three-comp rule (minimum)
Build ARV from at least three sold comps that a licensed appraiser would credibly use:
- Same neighborhood — same ward, school district, or suburban submarket; not “within five miles” unless rural
- Similar product — brick two-flat vs. brick two-flat; not ranch vs. colonial
- Sold within 90 days — 180 in slow markets; adjust for seasonality
- Similar GLA and bed/bath — within 10–15% square footage
- Similar condition post-rehab — compare to renovated sales, not as-is distress
Pull comps from MLS, county recorder, or a credible third-party platform — then open each listing and note condition, basement, garage, and lot.
Adjustment grid (simplified)
Start with each comp’s sold price, then adjust to your subject:
| Factor | Typical adjustment direction |
|---|---|
| Extra bed/bath | +$8K–$25K per unit (market-dependent) |
| Garage vs. no garage | +$10K–$30K in Midwest urban markets |
| Finished basement | +$15K–$40K if legal and dry |
| Smaller/larger GLA | $50–$120 per sq ft delta (use local appraiser norms) |
| Inferior/superior location | ±5–15% of comp price |
| No central air / updated mechanicals | −$8K–$20K if your subject will have new systems |
Average the adjusted values. Your ARV should cluster — if comps span $320K–$380K after adjustment, underwriting $395K requires a written justification (water view, ADU, etc.).
Automated ARV tools — useful, not gospel
Instant ARV widgets and AVMs are starting points. They excel at:
- Flagging whether a market is $180K or $280K before you drive the property
- Screening bulk acquisitions in unfamiliar metros
They fail when:
- Condition variance is extreme (fire, foundation, flood)
- Small multifamily or mixed-use lacks AVM training data
- New construction or recent zoning changes reset the comp set
- Rural or lakefront properties have sparse sales
Rule: if an automated ARV exceeds your manual comp average by >5%, trust your manual work unless you can name the premium feature.
Worked example — suburban ranch flip
Subject: 1,450 sq ft ranch, 3/2, no garage, needs full interior + mechanical
As-is purchase target: $165,000
Rehab budget: $55,000
| Comp | Sold | GLA | Adjustments | Adjusted |
|---|---|---|---|---|
| A | $278,000 | 1,520 | −$4K GLA, −$12K no garage vs. A | $262,000 |
| B | $295,000 | 1,480 | −$2K GLA, −$12K garage | $281,000 |
| C | $268,000 | 1,400 | +$2K GLA, −$12K garage | $258,000 |
Indicated ARV: ~$267,000 (conservative) to $281,000 (upper)
All-in: $220,000 + $18K carry = $238,000
Spread at $267K ARV: ~$29K before selling costs — workable for an experienced flipper; tight for a first deal.
When to call the lender before you offer
Contact us when:
- ARV supports ≥70% LTV after repair with your planned scope
- You have three comps saved as PDFs or MLS sheets
- Rehab scope is line-itemed — not a single “$60K rehab” guess
- You know whether exit is resale or BRRRR/DSCR — ARV vs. stabilized value differ on multifamily
Get pre-qualified with your comp packet and scope. We will stress-test ARV against recent files in your submarket before you waive inspection.
Common ARV mistakes on fix-and-flips
- Using active listings instead of sold prices
- Comping Wicker Park finishes in Englewood basis — different buyer pool
- Ignoring transfer tax, commission, and carry in profit math
- Assuming 100% of rehab increases value dollar-for-dollar
- Forgetting reassessment after major rehab in Cook County
Next steps
- Pull three sold comps and build an adjustment grid
- Set ARV at the conservative cluster unless you have a defensible premium
- Model all-in cost, carry, and selling costs at 6%–8% of ARV
- If spread works, request proof of funds and submit your offer
Questions on a specific address? Call (833) 264-7776 with your comp sheet — we will tell you whether the ARV story matches what our appraisers see in your market.
ARV is a market-value opinion, with conditions attached
Federal bank rules define market value in 12 CFR § 34.42. It is the most probable price a property should bring in a competitive, open market. Buyer and seller are each acting prudently. The price is not pushed by undue stimulus. A reasonable time is allowed for exposure. Payment is cash in U.S. dollars, or financing comparable to cash. The price is not inflated by special financing or concessions.
That definition is written for federally related appraisals. Fix-and-flip lenders still use the same idea. Your ARV is the probable price after the rehab, on a normal listing period, without a fantasy concession. It is not the price a relative would pay. It is not the price if you offer the buyer a rate buydown you forgot to deduct.
Five checks fall out of that definition:
- Use sold prices, not active asks. A listing is a hope. A closed sale is a fact.
- Match condition to the house you will deliver, not the house you are buying.
- Adjust for seller credits. A $15,000 closing-cost credit is not part of the real price.
- Allow a normal marketing time. A contract in three days can be a strong price or a low one. Read the days on market.
- Ignore financing that a typical buyer will not receive. A sale with a private second lien needs an adjustment before it supports your ARV.
Jaken Finance Group caps fix-and-flip loans at 75% of ARV and, on qualified files, up to 100% of cost. The funded amount is the lower figure. A complete fix-and-flip or bridge file closes in 7–10 business days. A later DSCR loan closes in about 14 business days and is sized on rent, not on this resale ARV.
A national price index is not your ARV
The FHFA all-transactions house price index for the United States was 719.87 in the second quarter of 2026. A year earlier it was 698.69. The base is 1980 first quarter equals 100. Both figures are on FRED series USSTHPI. The index rose about 3.0% over that year.
That 3% is a national average of many transactions, including refinance appraisals. It is not the adjustment for your block. Adding 3% to a comp from last June can be reasonable in a stable tract. It is reckless if the only nearby sale was a renovated colonial and your subject is a ranch without a garage. The index tells you the country did not reprice by 15% in twelve months. Your three sold comps tell you what this house is worth.
Automated models fail in the same spot. They smooth condition. Fire, foundation, and flood damage are not in the average. If an automated value sits more than 5% above your adjusted comp cluster, stay with the comps unless you can name the feature a buyer will pay for.
Illustration: the 75% cap binds before cost does
Illustration only.
| Line | Amount |
|---|---|
| Contract price | $210,000 |
| Rehab | $70,000 |
| All-in cost | $280,000 |
| Comp-supported ARV | $340,000 |
| 75% of ARV | $255,000 |
| 100% of cost | $280,000 |
| Loan at the lower test | $255,000 |
Cash still needed at the table is about $25,000 plus closing costs, because cost exceeds the ARV cap. Interest-only carry at 12% on $255,000 is $2,550 a month. Six months of carry is $15,300. Selling costs at 7% of the $340,000 ARV are $23,800.
Stack it: $280,000 cost, plus $15,300 carry, plus $23,800 selling costs, is $319,100. Against a $340,000 sale, the spread is about $20,900 before points, taxes, and surprises. That can work for a sponsor who has done this scope before. It is thin for a first flip. If the ARV is really $320,000, 75% is $240,000, and the cash gap gets wider. Recut the offer or the scope. Do not raise the ARV to save the deal.
What to send with the comp packet
- Three sold comps, each with photos, closed date, and concession notes
- A line-item scope, not one round rehab number
- Your exit: resale, or a rental refinance under DSCR loan terms
- Insurance and tax estimates at investor rates, not the seller’s homestead bill
- Any well, septic, flood, or foundation report you already have
Rate bands on the flip are 8.99%–13.5% interest-only for 6–12 months. See fix and flip loan rates for what moves a quote inside that band. Call (833) 264-7776 before you waive an inspection if the three adjusted comps do not sit in a tight cluster.
Concessions, exposure time, and a bad comp
The market-value rule in 12 CFR § 34.42 assumes a reasonable time on market and a price that is not propped up by concessions. Two closed sales at $360,000 are not equal if one gave the buyer $18,000 in closing costs and the other gave nothing.
Illustration. Sale A closed at $360,000 with an $18,000 seller credit. The net is $342,000. Sale B closed at $348,000 with no credit. Sale B is the stronger comp even though the deed price is lower. Averaging the two deed prices, $354,000, overstates the market by mixing a concession back in. Use $342,000 and $348,000, then adjust for beds, baths, and garage.
Days on market belong in the same note. A sale in six days can mean demand. It can also mean the list price was low. A sale in 110 days, at a price that only appeared after two cuts, is not the ceiling for your ARV. Write the original list price, the cut, and the concession on the comp sheet. Appraisers will. If your packet hides them, the review will cut the value after you are under contract.
Exposure time also caps optimism on thin streets. If the three sales took 70, 90, and 120 days, a flip budget that assumes a 21-day listing is using a different market than the comps. Carry for the longer window, or price the ARV at the conservative end of the cluster. Jaken Finance Group will underwrite the packet you can defend, not the average of three automated estimates.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. Closing times may be delayed due to appraiser property access . All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
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Jaken Finance Group, 2300 Barrington Road, Suite 400, Hoffman Estates, IL 60196