Underwriting for the Market You Have: A Credit View on ARV, Contingency, and Repeatable Deals

Why Tighter Markets Punish Optimistic Underwriting

Real estate used to be one national story. Today it is many local ones. Some markets are posting price gains, others are flat, and some are declining, and even within a single metro, results vary by neighborhood and price band. The common thread is financing cost: consumer mortgage rates moved from the high 5% range to the mid 7% range over roughly six to eight months, with a sharp move in September 2026.

In a recent conversation, Anchor Loans CEO Ray Mathoda sat down with Anthony Martinez, SVP of Credit, who reviews thousands of deals a year across 48 states. His core takeaway is simple: in a tighter, slower market, the deals that fail are the ones that only work if everything goes right.

MARKET INSIGHTS

Stacked Optimism Is the Real Risk

Investors rarely get hurt by one bad assumption. They get hurt by several aggressive assumptions layered together: an ARV pulled from a hotter, more liquid period, a construction budget without contingency, a compressed timeline, and no fallback plan. Each one looks defensible on its own. Together, they create a model with zero tolerance for friction.

This matters more now because investor profits are already down from their peaks. Thinner margins leave less room to absorb a slow sale or a cost overrun. Operators should stress-test the full stack, not each line in isolation, and ask what happens when two assumptions miss at the same time.

ARV Has to Reflect What the Market Has Proven

Comp windows matter. Sales from the last 30 to 60 days, stretching to 90, describe today’s market. Sales from 180 or 365 days ago may describe a completely different one. Listings can support a value, but they do not prove it. A property listed at $1 million is not worth $1 million until it closes there.

The discipline is to stay within the market’s proven price per square foot rather than trying to set a new high. Martinez flags ARVs anchored by a single high comp as one of the clearest warning signs on a file. Operators should also underwrite the end buyer: who that buyer is, whether they can secure financing at current rates, and what the home will actually cost them each month. At mid 7% rates, that buyer math has changed.

Contingency Is Three Layers, Not One

Most investors budget a construction contingency. Fewer plan for the other two. The first layer covers cost overruns and scope additions discovered mid-project. The second covers timeline: entitlement delays, weather, and contractor capacity, all of which push out hold costs and carry. The third is liquidity: dry powder outside the loan to cover payments if the hold runs longer than planned.

Martinez is clear that this applies across geographies and product types. The operators who weather slower stretches are the ones who can carry a project through them without being forced into a bad exit.

Price Discipline Beats Waiting for the Perfect Buyer

Experienced operators watch weekly activity once a property hits the market. If showings and offers are light at the list price, they cut quickly, sell to a buyer who can close, and recycle capital into the next project. They do not hold out for a buyer who will pay the ARV they originally penciled. In a slower market, time on market is a cost, and capital velocity is often worth more than the last few thousand dollars of sale price.

WHAT THIS MEANS FOR OPERATORS

For fix-and-flip investors, the priority is ARV discipline and a fast pricing response. Underwrite to recent closed comps, set a price-reduction trigger before listing, and treat the exit as part of the plan rather than an afterthought. Anchor’s fix and flip borrower’s guide is a useful starting point for structuring that plan.

For builders, timeline contingency deserves as much attention as cost contingency. Entitlement and weather delays compound carry, and a project financed through a ground-up construction loan should be modeled with extended timelines from day one.

For renovation-focused investors, scope discipline is margin protection. Budget for the addition you did not plan on, and lean on an experienced general contractor with a track record. For newer operators, that team is one of the strongest signals a lender looks for.

For rental investors and anyone with an exit question, build a Plan B into acquisition. If a project cannot sell at the target price, it should still pencil as a refinance into a DSCR loan and a long-term hold.

Across all four groups, the strategic posture is the same: stay in your lane. Experienced borrowers operate in geographies they know, with product types they understand, using a defined buy box and consistent crews. Martinez’s advice for the next year is to favor repeatable singles and doubles over home-run deals. Operators chasing triples and home runs are more likely to step outside their comfort zone, which leaves room for disciplined investors with dry powder to keep executing. Explore Anchor’s product matrix to match financing to the deals you can repeat.

REGIONAL OPPORTUNITIES AND RISKS

Because real estate is local again, national headlines say little about any individual deal. Some markets are softening while others continue to perform. For newer operators especially, Martinez prioritizes market liquidity: whether the finished product can be absorbed at a reasonable pace, measured by days on market.

The practical inference is that market selection now happens at the neighborhood and price band level, not the metro level. A strong city can contain slow submarkets, and a soft one can contain pockets that still move. Anchor’s U.S. Housing Monitor and investor resources can help frame that local view.

CONCLUSION

This market rewards operators who underwrite to evidence, carry real contingency, and price to sell. It also rewards treating your lender as a partner. Bringing a deal early, before contingencies expire, gives both sides time to pressure-test the numbers. Martinez notes that some borrowers have walked away from deals after that conversation and thanked Anchor for it. The best deal is sometimes the one you pass on.

The opportunity has not disappeared. It has shifted toward investors who can execute the same deal well, repeatedly, with cushion to spare. Ready to talk through your next project? Connect with Anchor Loans.

Watch the full conversation between Ray Mathoda and Anthony Martinez on YouTube: Fix & Flip Investing in 2026: ARV, Construction Costs & Exit Strategies

FREQUENTLY ASKED QUESTIONS

How should I calculate ARV for a fix and flip in today’s market?
Base ARV on recently closed sales, ideally within the last 30 to 90 days, rather than older comps or active listings. Stay within the price per square foot the market has already proven, and avoid anchoring to a single high comp. Factor in whether your likely buyer can finance the purchase at current rates.

How much contingency should a real estate investor build into a project?
Plan for three types of contingency: construction costs, timeline, and liquidity. Construction contingency covers overruns and unplanned scope, while timeline contingency accounts for entitlement, weather, and contractor delays that increase carry costs. Liquidity contingency is cash outside the loan to cover payments if the hold runs longer than expected.

What are the warning signs that a fix and flip deal will not work?
The biggest red flag is a deal that only works if everything goes perfectly. That usually looks like an ARV anchored by one high comp, a tight timeline, a thin budget contingency, and no backup exit. When several of these show up together, walking away is often the better decision.

What is a good backup exit strategy if a flip does not sell?
A common Plan B is refinancing into a DSCR loan and holding the property as a rental. To make that work, the deal should pencil as a rental at acquisition, not just as a flip. Building this in upfront gives you an alternative to selling below your target price.

Should real estate investors expand into new markets right now?
Anchor’s credit team sees experienced investors succeed by staying in geographies and product types they already know. With some markets softening and others performing, local knowledge of buyers, pricing, and days on market is a real advantage. Focusing on repeatable deals is generally safer than chasing outsized returns in unfamiliar territory.

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