How lenders determine after-repair value (ARV)
After-repair value (ARV) is what a property should sell for once the planned work is finished. Lenders determine it from closed sales of similar, recently renovated homes nearby, not from asking prices or automated online estimates.
Start with closed sales
The strongest evidence of value is what comparable homes have actually sold for. Active listings only show what sellers hope to get, and online automated estimates can miss condition, layout and finish quality. At Prairie Stone Lending, closed comparable sales drive every valuation.
What makes a good comparable
- Close by: same neighborhood or submarket, ideally on similar streets.
- Recent: sold recently enough to reflect today's market.
- Similar home: comparable size, bedrooms, bathrooms, age and style.
- Similar finish: renovated to the level you're planning, not a dated or distressed sale.
- Similar features: basements, garages and lot size can all move value.
Price per square foot is a check, not the answer
Average price per square foot from the closed comparables is a useful starting point, but it has to be adjusted for the subject's condition and finish relative to those sales. Multiplying a high price per square foot by a large house can produce a number no buyer on that street has ever paid.
Stay inside what has actually sold
A conservative ARV stays within the range of closed sales and doesn't extrapolate above the best sale on the street. Even a great renovation is limited by what buyers in that neighborhood have shown they'll pay. We lend against the conservative end of our ARV range.
How to help your deal
- Send the comps you're using, with addresses and sale dates.
- Include a clear scope of work so we know the finish level.
- Note features that set the house apart, like a finished basement or an added bathroom.
Check my deal and include your comps in the notes.