ARV Is the Most Dangerous Number in Real Estate
Why a 5% ARV error can erase most of your profit — and how pros comp property without fooling themselves.
ARV Is the Most Dangerous Number in Real Estate
If there’s one number that ruins more real estate deals than any other, it’s ARV.
Not because ARV is confusing.
Because it’s easy to inflate without realizing it.
A small ARV mistake doesn’t reduce profit a little.
It often removes it entirely.
Why ARV errors hurt so much
On a $300,000 property:
- 5% ARV error = $15,000
- 7% ARV error = $21,000
Most flips target $25k–$40k gross profit.
So a modest miss can wipe out 40–80% of margin.
And ARV errors don’t just hit profit—they influence every downstream decision.
Where ARV inflation comes from
Most ARV inflation is not intentional.
It comes from shortcuts.
Common mistakes:
- using active listings instead of closed sales
- comping from a better neighborhood “because it’s nearby”
- ignoring school district boundaries
- ignoring lot size differences
- assuming top-of-market finishes
- copying another wholesaler’s ARV without re-comping
Each might add 1–2%.
Stack them, and you’re 7–10% high.
Closed comps vs active comps (why it matters)
Active listings represent:
- seller hopes
- agent optimism
- “test the market” pricing
Closed comps represent:
- what buyers actually paid
- what appraisers supported
- what the market cleared
If you comp off actives, you can create an ARV that only works if the market gives you a gift.
The retail buyer reality test
Ask:
Who is the buyer at the end?
FHA buyer? VA buyer? First-time buyer? Move-up family? Cash buyer?
Each buyer has:
- different finish expectations
- different price sensitivity
- different tolerance for layout quirks
If your ARV assumes a top-dollar cash buyer but the neighborhood sells to FHA, your ARV is fragile.
A disciplined ARV workflow
A simple process that works:
- Pull 6–12 closed comps (start wide)
- Filter to the closest and most similar (3–6 comps)
- Normalize by:
- beds/baths
- square footage
- lot size
- garage
- year built/era
- finish level
- Adjust down for uncertainty
- Use a range (e.g., $295k–$305k), not a single number
Then make the deal work at the low end.
What this means for wholesalers
You don’t need perfect ARVs.
You need defensible ARVs.
Wholesalers who close consistently:
- show comps
- explain adjustments
- disclose uncertainty
- leave margin for buyer error
That’s how you keep repeat buyers.
Bottom line
ARV is not a marketing number.
It’s a risk variable.
Treat it conservatively and deals survive. Inflate it and deals break quietly—later, and expensively.