How We Calculate Your Cash Offer — The Formula, Step by Step
Most companies in our business treat their offer like a magic trick. Ours is a formula, and this page shows how it works — the four inputs, the rule of thumb behind them, and the questions that keep any cash buyer honest. What it will not do is quote you a number: your number comes from your house, at the walkthrough.
A calculator, a worksheet and a small house model on a desk — working out a cash offer
When we hand you an offer, we can show you exactly where the number came from — because it comes from a formula, not a feeling. This page walks through each input in that formula and the rule of thumb our whole industry works from. What you will not find here is an example with dollar figures in it. Not because we are hiding anything: because any number we print here would be about some other house, and the only number that matters is the one built from yours — which we will show you, line by line, at the walkthrough.
The formula
After-repair value − repair costs − resale costs − our margin = your offer. If a buyer cannot fill in those four blanks for your house, they are guessing — or hoping you will not ask.
The four numbers, one at a time
After-repair value (ARV)
What your house would sell for on the open market after it has been fully renovated. We get there from recent sales of similar houses in your own neighborhood, adjusted for size, layout, lot and condition — the same comparable-sales method an appraiser uses. This is the ceiling every other number is subtracted from.
Repair costs
What it will actually cost to take your house from its current condition to that renovated one — roof, mechanicals, kitchens, baths, flooring, paint, everything. We estimate this during the walkthrough, and it is the number we most often go through line by line with sellers, because it is the one people are most surprised by.
Resale costs
When we eventually resell the renovated house, we pay the things you are skipping by selling to us: agent commissions on that future sale, closing costs, taxes, insurance, utilities and loan carrying costs for the months the project takes. You never pay any of this — but it has to live somewhere in the math, so it lives here.
Our margin
We are a business, and pretending otherwise would be the least transparent thing on this page. We keep the margin per house modest on purpose — our model works by doing this well and often, not by winning big on any one seller. It is also the number that gets squeezed first when we want a deal to work for you.
A worked example: the 70% rule
Real-estate investors compress those three subtractions into a shorthand old enough to have a name — the 70% rule. It says a buyer can pay about seventy percent of the after-repair value, minus the repair costs, and still make the project work:
Offer ≈ (after-repair value × 70%) − repair costs. The thirty percent that comes off the top is not profit — it is where the resale commissions, closing costs, taxes, carrying costs, project risk and the margin all live. The repairs come out after that, which is why two houses with the same ARV can get very different offers.
It is a rule of thumb, not a promise, and it flexes in both directions. A house needing only light work in a neighborhood where renovated houses sell fast can come in above it. A house needing a full renovation — roof, mechanicals, everything — can come in below it, because the repair subtraction is doing heavy lifting.
In our market it flexes down more often than up. Cleveland and Northeast Ohio carry a large supply of distressed houses, and a roof or a furnace costs the same here as it does in a city where renovated houses sell for three times as much — so repairs eat a far bigger share of the value. That is why offers here routinely land below what national averages, out-of-town blogs, or online calculators suggest. It is the market, not a trick — and it is exactly why we show every input at the walkthrough instead of quoting percentages over the phone.
Why the offer is below retail — and when that trade is still wrong for you
The formula makes something plain that we would rather say out loud: a cash offer is below full retail, always. The repairs, the resale costs and the margin have to come from somewhere. What you get in exchange is the other side of the ledger — no repairs, no cleanout, no commissions, no months of mortgage and utilities while the house sits, and no buyer whose financing collapses three weeks in.
And sometimes that trade genuinely is not worth it. If your house is in good condition, in a neighborhood buyers want, and you are under no time pressure — list it with a good agent. Even after commission you will usually net more than we can offer, and we will tell you so at the walkthrough. The full comparison lives in Realtor vs. cash buyer in Cleveland.
How to sanity-check any cash offer
- Ask for the buyer’s ARV and the comparable sales behind it. If the comps are from another neighborhood — or another decade — the ceiling is wrong and everything under it is too.
- Ask for the repair estimate, itemized. A single round number is a guess wearing a suit.
- Ask what they counted as resale or selling costs. It is a real cost — but it should be a defensible one, not a place to bury an extra discount.
- Ask whether they are buying the house themselves or assigning your contract to someone else. Both models exist; you deserve to know which one you are in.
- Be suspicious of any buyer who quotes a number — or a percentage — before seeing the house. The formula has four inputs, and three of them cannot be known from the curb.
- Then ask us the same questions. We will answer them with the worksheet in front of you.
Want your numbers filled in?
The walkthrough takes about twenty minutes, the offer is free, and the breakdown comes with it. If listing would net you more, we will say so — in writing if you like.
Frequently asked questions
After-repair value: what a house would sell for on the open market once fully renovated. It is estimated from recent sales of comparable nearby houses, adjusted for size, layout and condition, and it is the starting point of every serious cash offer.
An investor rule of thumb: a buyer can pay about 70% of the after-repair value, minus repair costs, and still make a renovation project work. The 30% covers resale commissions, closing and carrying costs, project risk and margin. It is a starting point, not a quote — the repair subtraction is different for every house.
There is no flat percentage, because the offer is ARV minus repairs, resale costs and margin — the 70% rule minus repairs is the honest shorthand. In markets with a large supply of distressed houses, like Cleveland, offers often land below national rules of thumb, because repairs cost the same here while renovated values are lower. Distrust any buyer quoting a percentage before seeing the house.
Because the buyer pays the renovation, carries the property through it, pays commissions and closing costs on the eventual resale, and keeps a margin to stay in business. The discount is those real costs made visible — which is also why a seller with a market-ready house and no time pressure usually does better listing.
No. Every line in the formula is paid by us, after we own the house. Your offer is the number at the bottom, and on our purchases we typically pay the closing costs on your sale too.
Yes — ask and we will go through the ARV, the comps, the repair estimate and the rest line by line. An offer you cannot see inside is not an offer you can compare against anything.
Challenge it — that conversation is normal and welcome. Bring a contractor’s quote if you have one. The estimate moves when the evidence does, and the offer moves with it.
Find out what we would pay
Free, no obligation, and no pressure. If our number does not work for you, that is a perfectly fine answer.
Keep reading
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How the Cash Offer Process Works — Step by Step
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