Sales Comparison Approach

The sales comparison approach values a property by comparing it with similar properties that recently sold, adjusting for differences in size, condition and location. It is how after-repair value is derived: find finished, comparable properties that sold in the last six months, and the subject is worth what they sold for, adjusted.

For a BRRRR the comparables have to be renovated properties, not the distressed stock the subject came from. Three to six sales of similar finished homes within a mile and six months are the standard. If they do not exist, the ARV is a guess, and the appraiser will say so at the refinance.

The method is also how you protect the appraisal. Pull the comparables yourself before you offer, model the deal at the low end of their range, and give the appraiser your scope of work and a list of the sales you relied on. Appraisers are not required to use them, but a documented case for the value beats hoping.

Further reading: Sales Comparison Approach on Wikipedia.