The formula behind almost every cash offer

Cash offers can feel like a mystery, but nearly every legitimate buyer is running the same basic math. Once you see it, you can judge any offer you receive — ours or anyone else's. There are three moving parts:

1. After-repair value (ARV)

This is what your home would realistically sell for after it's fully renovated, based on recent sales of comparable homes in your neighborhood — same size, same style, similar lot. ARV is the ceiling everything else is measured against. It is not your home's current as-is value; it's its potential value once the work is done.

2. The cost of repairs

Next comes an honest estimate of what it would take to bring the home up to that renovated value — roof, systems, kitchens, baths, cosmetics, and anything deferred. The more work a home needs, the further the offer sits below ARV, because someone has to pay for that work.

3. The buyer's costs and return

Finally, the buyer subtracts their own costs: closing costs on both ends, the cost of holding the property through the renovation and resale (taxes, insurance, utilities), and a fair return for taking on the project and the risk. This is the part sellers don't see in a retail sale — but it's also why a cash buyer can pay with certainty and close in days.

A worked example (illustration only)

Here's the math on a hypothetical home. The numbers below are for illustration only — every property and market is different, and your real figures depend on your home's condition and recent local sales.

In this example, the seller nets $130,000 with zero repairs, no commissions, and no closing costs — on a timeline they choose. A retail sale might list higher, but only after repairs, months on market, agent commissions of roughly 5–6%, and the risk of a buyer's financing falling through.

What is the "70% rule," and do we use it?

If you've researched cash buyers online, you've probably seen the 70% rule. It's a rough industry shortcut: a maximum offer of about 70% of the ARV, minus repairs. On our example home that would be (70% × $200,000) − $40,000 = $100,000.

It's a useful sanity check, but it's blunt. It bakes the buyer's costs, repairs, and return into one flat percentage, which can be too low on a lightly-updated home or too high on a heavy rehab. We don't price from a one-size-fits-all percentage — we build the number up transparently from your home's actual ARV, its specific repairs, and our real costs, which is why a clearly-explained offer often lands differently than the 70% rule suggests. See exactly how our cash offer works, step by step.

"Is a cash offer just a lowball?"

It's a fair question, and the honest answer is: a cash offer is lower than full retail value — on purpose — but it shouldn't be a lowball. The gap between a cash offer and a retail sale price isn't profit pulled from thin air; it's the repairs you don't pay for, the months of carrying costs you skip, the commissions you avoid, and the certainty of a sale that won't fall through.

The difference between a fair cash buyer and a bad one is transparency. A fair buyer will walk you through the ARV they used, the comparable sales behind it, and the repair estimate — and won't pressure you. If a buyer can't or won't show you how they got to the number, that's your signal to walk. When a retail listing would genuinely net you more, the right buyer will tell you so.

When a cash offer is worth taking — and when it isn't

If listing is genuinely the better move for you, we'll say so — even though it isn't a sale for us. You can also read more about the situations where selling for cash makes the most sense.

How cash offers are calculated: common questions