Short-term real estate financing for acquisition, value-add, and transitional scenarios. When to use bridge loans and how to exit cleanly.
After repair value is what a property will be worth once renovation is complete, and it sets the ceiling on a fix and flip loan because lenders cap total exposure as a percentage of ARV rather than of purchase price. ARV is established by an appraiser using comparable sales of renovated properties in the same submarket, working from the scope of work you provide. That last point is where most investors lose money: an appraiser given a vague rehab budget values a vague renovation. An ARV unsupported by genuine comparable sales is the single most common reason a fix and flip file is declined, and it is almost always avoidable with better comp work before the offer.
Lenders apply two ceilings at once. The first is a percentage of total project cost — purchase plus rehab, commonly up to 90%. The second is a percentage of after repair value, often 70 to 75%. Your loan is the lower of the two.
This is why a deal with a thin ARV gets declined even when the cost basis looks fine. The ARV ceiling binds first and there is nothing the borrower can do about it except bring more cash or renegotiate the purchase.
Use closed sales, not listings. Match condition — a renovated comparable for a renovated subject. Stay inside the same submarket rather than the same city, because value can shift block to block in markets like Baltimore, Detroit and Philadelphia.
Recency matters more than most investors assume. Sales older than six months carry less weight, and in a moving market an appraiser may discount them entirely. Three tight comparables beat eight loose ones.
An appraiser valuing a finished property has to know what finished means. A detailed scope listing systems, finishes, layout changes and square footage produces a defensible value. A lump-sum number like “$60,000 rehab” produces a guess, and guesses come in low.
Providing the scope at application rather than after the appraisal is ordered is free and materially changes the outcome. It is the highest-return five minutes in the entire process.
Four options. Rebut with better comparable sales the appraiser did not use, supported by documentation of why yours are more appropriate. Order a second opinion through a different capital source, since lenders use different appraisal management companies. Renegotiate the purchase price. Or reduce scope so the numbers work at the lower value.
What does not work is arguing the conclusion without new sales data. Appraisers respond to comparables, not to opinions about the market.
In Cleveland, Dayton, Toledo, parts of Detroit and much of the rural Midwest, a valuation may rest on two or three comparable sales. That concentration adds risk for both you and the lender, and lenders respond by underwriting more conservatively.
The practical adjustment is to build a wider margin into the deal in thin markets rather than assuming your ARV will be accepted at face value. An aggressive ARV in a thin market is the fastest way to lose money on a flip.
After repair value — what the property is worth once renovation is complete and it is ready for sale or rent.
By an appraiser using comparable sales of similar renovated properties in the same submarket, valued against the scope of work you provide for the subject property.
Commonly 70 to 75% of ARV, applied alongside a separate ceiling on total project cost. Your loan amount is the lower of the two figures.
A screening heuristic: pay no more than 70% of ARV minus rehab cost. It is a filter for whether a deal is worth underwriting, not a lender requirement.
You can submit a rebuttal, and it works when it supplies better comparable sales the appraiser did not use. Arguing the conclusion without new sales data rarely changes it.
Often yes. Lenders use different appraisal management companies and different valuation approaches, and some accept a broker price opinion instead of a full appraisal on qualifying deals.
Considerably. An appraiser needs to know what the finished product will be. A detailed scope produces a defensible value; a lump-sum rehab figure produces a conservative one.
Generally within six months, and tighter in a moving market. Older sales carry less weight and may be discounted entirely.
Underwrite more conservatively. In thin-comp markets a valuation resting on two or three sales carries real risk, and lenders price for that with lower leverage.
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