We Buy Houses Birmingham Alabama: What Is “After Repair Value”?

We Buy Houses Birmingham Alabama

We buy houses Birmingham Alabama‘ are real estate companies that buy properties and pay in cash. They are one of the fastest ways to get rid of a property that could take a longer time to sell if you sold through a real estate agent. You get to avoid the hassle of the processes involved in selling traditionally and get your cash within a few days. If you are pressed for cash, this is your best bet.

One of the most frequently asked questions is about after repair value, simply put, is the value of a house after every damage has been fixed. It is the estimated worth a house has after renovations have taken place. This is used by real estate investors or flippers to determine what their profit or return of investment would be.

One of the big benefits of using a we buy houses Birmingham Alabama companies is they specialize in buying houses just as they are. The leaky roofs, rotten wood cabinets, and creaky floorboards are not a deterrent. This is because the houses are often repaired. This is where the After Repair Value comes in.

How Does After Repair Value Work?

Earlier on, it was simply defined as the value of a house after repairs have been made. After Repair value is calculated to have an idea of how much the house is worth after repairs and in readiness for sale. It is calculated by getting the average estimate of compared houses. This means that similar houses with similar repairs that have been sold recently are looked at on the multiple listing service and an average price is derived from their sold value. That is your estimated After Repair Value.

These compared houses otherwise known as comps should meet the following criteria;

  • Must be in the same vicinity- This means they must be in the same neighborhood because the location of a house has a huge role to play in the value of a house. The comps ideally should be within a one-mile radius of the subject house.
  • Must be in the same age bracket such that the age difference between them should not exceed a 5-10 years age difference. This makes the After Repair Value more realistic.
  • Must have the same or similar repairs. This makes the After Repair Value more relatable.
  • Must be of similar sizes. Ideally, the comps must be not more than 250 square feet of the property you are calculating for.
  • Must have a similar construction style. This includes the craftsmanship, the preferred materials used for construction, such as aluminum, brick, wood, etc, and so on. 

All of these are a strong basis for comparison to get an accurate After Repair Value. It is advisable to have 3-6 comps that have been sold within the time frame of 3 months and sometimes 6 months. This also aids the correct evaluation of the After Repair Value which is the average sale price of all the comps.

The 70% Rule

Everybody wants to make as much profit as possible from sales, and so do real estate investors. Nobody wants to pump money into a property and still purchase it for the market price. To avoid this, the real estate standard formula used by investors to make an offer for such property is 70% of the After Repair Value minus the estimated cost of repair.

This means that if the After Repair Value of a house is $350,000, and the evaluated cost of repair is $50,000 then:

 $(350,000×70%) – $50,000 = $ 195,000

$195,000 is then the maximum offer of the investors for the property.

We buy houses Birmingham Alabama

‘We buy houses Birmingham Alabama‘ companies such as Chase Buys Houses often come across and use terms like After Repair Value to make a profit off not so profit-promising properties.

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