ARV vs. Market Value: What’s the Difference in Real Estate?
If “how to flip a house” or “how to find good real estate deals” is something you Google, chances are you have come across ARV and market value. Well, here is the catch: the two terms are used interchangeably, but they are NOT the same. Confusing the two could affect your finances, however there is no need to worry.
We will explain the distinction between ARV and market value in extremely simple terms in order to eliminate confusion around them. There will be no complicated terminology – only the information you need to know:
- What each term means (with real-life examples)
- When to use ARV vs. market value
- How investors use both to make smarter decisions
Let’s get started.
ARV and Market Value: Definitions Made Simple
What Is Market Value?
The current worth of a property is the market value. It is evaluated, and that is the amount a buyer would be willing to spend on a house in its present state. Market value is what the home owner would be paid if a buyer checked out the home and there were no major repairs or upgrades.
For instance, if you put your house up on Zillow tomorrow, the market value is relative to how much you would approximately receive if it sold in the exact condition it is: “as-is.”
What Is ARV (After Repair Value)?
ARV is a shortened form for After Repair Value. After expressing the term, it is easy to guess the detailed meaning ARV is an approximation of what a house will be worth after it has been fixed up or renovated.
For example:
- A rundown house has a market value of $200,000 today.
- If you spend 50,000 on repairs (new kitchen, fresh paint, etc.), its ARV might jump to 300,000
ARV is all about future potential—it’s what investors use to decide if a fixer-upper is worth buying.
Key Differences Between ARV and Market Value
| Factor | ARV | Market Value |
| Timing | Future value (after repairs) | Current value (as-is) |
| Used By | Investors, flippers, wholesalers | Homeowners, appraisers, agents |
| Calculation | Based on repairs + comps | Based on recent sales of similar homes |
| Purpose | Estimating profit for renovations | Pricing a property for sale today |
Let’s Break It Down:
- Time Frame
- Market value = Right now.
- ARV = After you’ve fixed the place up.
- Who Cares About It?
- Market value matters to:
- Homeowners selling their property.
- Buyers looking for a move-in ready house.
- Banks approving mortgages.
- ARV matters to:
- House flippers (to calculate profit).
- Wholesalers (to price deals for investors).
- Hard money lenders (to fund renovations).
3. How They’re Calculated
- Market value uses comps (comparable properties) that have sold recently in the area. Example: A 3-bedroom home in Miami sold for $350k last month? That’s a comp.
- ARV starts with market value and has the value of the repairs. But here’s the catch: Not all renovations boost value equally.
A 20k kitchen remodel might add 40k to ARV, but a $20k roof replacement just maintains the home’s value.
When to Use ARV vs. Market Value
Use Market Value If…
- You’re buying or selling a house in its current condition.
- You’re getting a mortgage or refinancing.
- You need to price a rental property.
Use ARV If…
- You’re flipping a house (buy, renovate, sell).
- You’re wholesaling a deal to an investor.
- You’re applying for a renovation loan.
Real-Life Examples: ARV vs. Market Value
Example 1: The Fixer-Upper Flip
- Market Value (Today): $150,000 (needs a new roof and kitchen).
- Repair Costs: $40,000.
- ARV (After Repairs): $250,000 (based on updated comps).
- Profit Potential: 250,000 -150,000 – 40,000 = 60,000.
Without calculating ARV, the investor might overpay and lose money.
Example 2: The Move-In-Ready Home
- Market Value: $500,000 (recently renovated, sells as-is).
- ARV: Not relevant here—no repairs needed!
How to Use Both Metrics Together (Like a Pro)
Smart investors use market value to find deals and ARV to maximize profits. Here’s how:
- Find a “Comps Sweet Spot”
Look for areas where:- Market values are below regional averages (good deals).
- ARV potential is high (e.g., neighborhoods with rising home prices).
- Calculate Your MAO (Maximum Allowable Offer)
Formula:
MAO = (ARV x 70%) – Repair Costs
(The 70% rule ensures a 30% profit buffer for flippers.) - Double-Check with Market Value
If the market value is rising in the area, your ARV estimates become safer. If it’s falling, rethink the deal.
Tools to Find ARV and Market Value
- Zillow/Redfin: Quick market value estimates (but verify with real comps!).
- PropStream: Pull comps and estimate ARV for specific neighborhoods.
- Contractors: Get repair quotes to calculate ARV accurately.
Common Mistakes to Avoid
- Assuming Repairs = Dollar-for-Dollar ARV
A 10k bathroom reno might only add 5k to ARV. Focus on upgrades buyers care about (kitchens, bathrooms, curb appeal). - Ignoring Market Trends
If home prices drop post-renovation, your ARV could fall short. Always check local market forecasts.
Final Takeaway
Market value tells you what a property is worth today.
ARV tells you what it could be worth tomorrow (after repairs).
By using both, you’ll avoid overpaying for properties and spot deals others miss. Whether you’re flipping houses, wholesaling, or just analyzing rentals, mastering these terms is key to long-term success.
Need Help Finding ARV Comps?
Check out your local MLS provider (Such as har.com) or with local real estate agents for expert insights.