How to Calculate After-Repair Value (ARV)

After-repair value is an estimate of the property’s market value in a defined post-renovation condition as of a stated date. It is not the as-is value, total project cost, or a target resale price.

The effective date matters because comparable sales, inventory, financing conditions, and buyer preferences change. An investor planning analysis usually uses information available today to estimate a future finished condition; an appraisal may apply a different effective date and methodology.

Record the subject’s property type, style, year built, gross living area, above-grade bedroom and bathroom count, lot, parking, basement, accessory space, and immediate location influences. Note functional issues such as an awkward layout, busy road, steep lot, or inferior access.

Translate the scope of work into a specific finished product. Identify changes to kitchens, bathrooms, systems, roof, windows, flooring, layout, exterior, landscaping, and permitted living area. The comparable set should resemble that completed result—not simply any property described as renovated.

Begin in the subject’s immediate competitive area: the same subdivision, school boundary, neighborhood, or buyer market. Expand distance only when too few relevant sales exist, and document why the broader area competes with the subject.

Prioritize recent arm’s-length closed sales. Pending and active listings help show current competition but do not prove a completed market price. If an older or more distant sale is necessary, give it less weight unless local evidence supports a time or location adjustment.

Prefer the same property type and a similar style, age, utility, and gross living area. Compare above-grade area separately from basement or other below-grade space. A ranch, condominium, split-level, and two-story home can attract different buyers even at a similar size.

Bedroom and bathroom counts matter through function, not labels alone. A legal bedroom with appropriate access and egress differs from a staged office or nonconforming basement room. When a comp needs a large size or room-count adjustment, look for a better comp before forcing the comparison.

School boundaries, traffic, views, block character, flood or hazard exposure, access, and proximity to amenities can create value differences within the same ZIP code. Crossing a major boundary can make a geographically close sale less comparable.

Compare lot utility as well as lot size. A level usable yard, view, corner exposure, waterfront access, or development potential may affect buyer behavior differently from raw square footage. Mark each comp as similar, superior, or inferior and look for local sales that help explain the difference.

Review listing photos, permits where available, and descriptions of systems and finishes. A cosmetic refresh is not equivalent to a property with new mechanical systems, corrected layout, permitted additions, and consistent interior and exterior work.

Over-improvement deserves special caution. If the planned finish exceeds every nearby sale, the incremental cost may not appear in market value. Use comps that reflect the local ceiling rather than importing pricing from a superior market.

Garages, carports, finished basements, below-grade bedrooms, additions, and converted space should not be valued as though every square foot is interchangeable. Market acceptance, quality, access, permits, ceiling height, natural light, and local reporting conventions all affect the comparison.

Separate permitted above-grade living area from below-grade or non-permitted space in the worksheet. If buyers pay something for the extra utility, reflect it only when closed sales provide evidence. Do not assume full above-grade value.

Convert each comparable sale into an indication for the subject’s planned condition. When a comp is superior, adjust its indication downward; when it is inferior, adjust upward. Base the direction and approximate magnitude on observed local buyer behavior, paired sales, broker input, or other market evidence—not a universal price-per-square-foot rule.

Keep an adjustment log showing the sale price, difference, direction, amount, and reason. If total adjustments become large or subjective, reduce that comp’s weight or replace it.

Assume the subject will be a permitted, fully renovated 1,850-square-foot, three-bedroom, two-bath home with a one-car garage. Three nearby renovated sales closed within four months. The dollar adjustments below are invented solely to demonstrate the arithmetic; they are not a standardized schedule, appraisal methodology, or indication of how Pillar or a lender will determine ARV.

Weight the comps by similarity, recency, location, and confidence in the adjustment—not by whichever produces the highest result. State a range first, then choose a planning figure within that range. Test the project at a lower sale price and a longer hold.

When the range is wide, the data may be signaling that the property is unusual or the search set is weak. Gather better evidence rather than forcing a precise number.

A detailed spreadsheet cannot compensate for poor comparable selection or unsupported assumptions.