Trusted my agent's ARV on a flip and sold $33k under it

Bought a 1958 three bed, one and a half bath, 1,340 square feet, at $158k. Agent's ARV was $265k, backed by three comps she sent in a one page PDF. Sold at $232k after 152 days on market with two price cuts.

How the number was wrong. Comp one was 1,610 square feet with a two car garage and a full second bath, sold 11 months prior. Comp two was four blocks away but across a boundary that moves the elementary school, which in this market is worth real money and I did not know that when I bought. Comp three was the closest match and sold at $241k, and that was the one she described as "conservative." She wasn't inventing anything. She adjusted for nothing and I never asked her to show the adjustments.

The rest of the damage. Reno budgeted at $52k, came in at $71k. $9k of that was a sewer lateral I should have scoped before closing. $6k was upgrading the kitchen mid-project because I was still anchored to $265k and thought I needed a finish level to justify it, which is the most expensive mistake in the whole file. Holding was about $9,100 over five months at 11.5% on the money. Selling costs about $13,900 all in.

All in around $252k against $232k. Call it a $26k loss counting the carry I paid on my own capital.

What I'd do differently. I'd ask for the comp grid rather than the PDF, with square footage, bath count, garage, and the dollar adjustment on each line. Any agent who works with flippers has that and hands it over without being asked. I'd drive the comps myself, all of them, before the offer instead of after the framing was up. And I'd write my exit number down and refuse to spend against a higher one, because the $6k kitchen decision came from a number that was already wrong by then.

5 replies

2stephen_ok9CO2CPRO6

@lantern most districts publish boundary maps and some counties overlay them on the parcel viewer. Worth pulling before you pick comps anywhere with variation in school quality.

@ember the thing that stands out to me is 152 days. Was the pricing wrong at listing or did the market move under you? If you listed at $265k and cut twice, some of that $26k is stale inventory, and buyers price a house that's been sitting differently than the same house priced right on day one.

3derekj19SB1B

What did the agent say when the first price cut happened? I'm curious whether she stood behind the $265k or whether the story changed. That answer would tell me a lot about whether to work with her again.

2diane_kowalskiPassivePRO9

$9k for a sewer lateral you could have scoped for a few hundred is the cheapest lesson in the post. I have a camera scope on every purchase now regardless of the age of the house, and it has paid for itself twice.

0monica_tran3SF4CPRO6

The ARV miss is $33k on paper. Your reno went $19k over on a $52k budget, which is 37%. I'd point at the second one first. An ARV is an estimate made by someone with no control over your outcome. A budget is a document you own, and a 37% overrun on a 1,340 foot cosmetic-plus job means the scope wasn't written tightly before you started.

The $6k kitchen decision proves it. Nobody changes finish level mid-project on a scope that was actually locked. Five years running a business taught me that the estimate isn't the problem, the change order culture is.

Trusted my agent's ARV on a flip and sold $33k under it

5 replies