Fix and Flip Appraisals Explained: As-Is vs ARV
Quick Answer
ARV appraisals estimate property value after renovation using comparable sales. As-is appraisals value the property in its current condition. Most fix and flip lenders use the ARV appraisal to determine maximum loan size.
Table of Contents
Two Types of Appraisals
When financing a fix and flip project, lenders may order one or both types of appraisals:
As-Is Appraisal
An as-is appraisal values the property in its current condition. This reflects what the property would sell for today, without any renovations.
As-is appraisals are used to determine the current LTV and ensure the purchase price is reasonable.
ARV Appraisal
An ARV (After Repair Value) appraisal estimates what the property will be worth after the planned renovations are completed. The appraiser reviews:
- The scope of work and rehab budget
- Comparable sales of renovated properties in the area
- Market trends and neighborhood conditions
The ARV appraisal is the primary driver of loan sizing in fix and flip lending.
How ARV Is Calculated
Appraisers use the sales comparison approach, looking at recently sold properties that are:
- Similar in size, age, and style
- Located within 1 mile of the subject property
- Sold within the last 6 months
- In renovated condition similar to the planned improvements
The appraiser adjusts for differences between the comparable sales and the subject property to arrive at the ARV estimate.
What Affects Your ARV
Positive Factors
- Quality of planned renovations
- Strong comparable sales nearby
- Improving neighborhood market
- Detailed and professional scope of work
Negative Factors
- Limited comparable sales data
- Declining market conditions
- Over-improvement relative to the neighborhood
- Structural issues that limit renovation potential
Preparing for a Strong Appraisal
- Provide detailed comps to your lender before the appraisal is ordered
- Submit a professional scope of work with specific materials and finishes
- Include photos of comparable renovated properties
- Be realistic about the finished product relative to the neighborhood
- Meet the appraiser at the property when possible to discuss the project
Related Reading
Key Takeaways
- ✓ARV appraisals drive loan sizing for fix and flip deals
- ✓Comparable sales within 6 months and 1 mile are ideal
- ✓A strong scope of work supports a higher ARV
- ✓Be prepared for low appraisals with backup comps