I have a house I just found listed with a realtor. The asking price is 109900. The City Assessment is about 180, and all of the comps in the area go for over 150. I’m trying to get all my ducks in a row so I can have a good number in my head as to what I will offer, provided the realtor ever returns my phone calls. I know what the formula is and the 70% and everything. So my question is, can I use the City Assessment as a general idea of the A.R.V. ? what is the rule of thumb when it comes to determining ARV?
The city assessment and the ARV/FMV have nothing to do with each other. The 2 values can be off by tens, if not hundreds, of thousands of dollars.
jmd_forest
Thanks for question adouglass and it is truly an AWESOME question that I wish more people would ask that are just getting started.
You do want to know… based on COMPARABLE RECENT SALES… what the property you are likely to buy will sell for in 60 days for cash. As jmd_forest pointed out, this has nothing to do with city assessment. You can mention in your marketing that it was assessed for $X but that’s just factual based puffery in your marketing of the property and should not be used by you when determining the true value.
I will cover some very basic information here about how to determine the actual Fair Market Value (FMR) or After Repair Value (ARV) but realize that this is an art and science that you get a lot better with over time with practice and doing it on a lot of properties. There are LOTS and LOTS of exceptions… like what do you do if no similar properties sold in the last 3 months and so on. But here is a good idea of some broad strokes to get you started…
First, you will need access to the recently sold properties… ideally properties sold within the last 3 months or so. We are NOT talking about properties that are listed for sale… they don’t count at this point. Find ones that are very similar (or identical to yours). The more similar the better. Same number of bedrooms, bathrooms, number of levels, neighborhood, square footage, year built and so on.
The chance of you finding ones that are identical is slim, so try to get as close as possible. If you find similar (aka comparable) properties that sold with the same number of bedrooms, bathrooms, similar age in the same neighborhood but have slightly different square footage, you can the calculate out the price per square foot of the ones that sold. Eliminate any abnormally high or low data to try to get a better range and then average them and multiple that dollar per square foot times the similar square footage in the property you are considering to get a better idea of value.
Once you get a feel for that, compare the property you have and the price you came up with to the currently listed properties in the market to see what you’re competing against in the same price range. Go view those properties and see how they compare to your property. Are they better value for the price? Worse? Make adjustments to your price based on that and the terms you are offering.
I hope that helps. Please do let me know if you have any other questions or if I can help in any other way.
You will want to start making adjustments to the price based on differences. For example, you can take properties that act
Wow thank you, that was very helpful! I wish more people would post like that, instead of the simple one liners.
You are very, very welcome. Thank you for posting so that other can also learn.
You can do it… keep going and you’ll get better and better.
If I can help in any way, let me know.