There's a lot of mystery around cash offers. Sellers think we throw out a lowball and hope it sticks. The truth is, when you're a serious operator, every offer is the output of a pretty boring spreadsheet. Here's exactly how it works.
The formula
A cash buyer's offer comes from one equation:
Offer = ARV − Repairs − Carrying & Selling Costs − Target Margin
Four numbers. That's it. Let's walk through each one.
1. ARV — After Repair Value
ARV is what your property would sell for in retail-ready condition. We pull this from comparable sales (comps) within the last 90 days, in your immediate neighborhood, of homes the same size and style as yours, that have been renovated to current market standards.
This is the single biggest variable in the offer. A buyer who's lazy with comps either lowballs you (using stale or distant comps) or overpays and can't close. A good buyer shows the comp set so you can see the math.
2. Repairs
Once we know what your house could sell for fixed up, we estimate what it costs to get it there. Foundation, roof, HVAC, electrical, plumbing, kitchens, baths, flooring, paint, landscaping, permits — all priced by trade.
Most sellers underestimate this, sometimes by 2–3x. A "small kitchen update" in your head is often $25k–$45k by the time we're done. We err on the side of safety because if we're wrong on the rehab, the deal doesn't work.
3. Carrying & selling costs
Owning a property isn't free. While we hold and renovate, we pay:
- Property taxes
- Insurance
- Utilities
- HOA dues (if applicable)
- Loan interest (if leveraged)
- Closing costs on both the buy and the resell
- Realtor commissions when we resell (~6%)
These add up. On a $400k ARV property, total holding + selling costs typically run $25k–$45k.
4. Target margin
This is where the cash buyer makes their living. A real operator targets a margin large enough to absorb surprises (and there are always surprises). For flips, that's typically 12–20% of ARV. For buy-and-hold, it's framed differently — yield, cap rate, cash-on-cash return — but the principle is the same: there has to be enough room for the deal to survive a few negative surprises.
What this means for you as a seller
When you understand the equation, three things become clear:
- The offer isn't personal. It's math. If your number doesn't match ours, it's because one of the four inputs above shook out differently than you expected.
- You can ask for the inputs. A serious buyer will show you the comps and the repair estimate. If they won't, that's a red flag — either they're not sophisticated or they're not transparent.
- Speed and certainty have value. A retail listing might net more on paper, but it costs you 90+ days of carrying costs, 6% in commissions, repairs to get listed, multiple price drops, and the chance the buyer's financing falls through. Stack those up against a fast cash offer and the gap narrows fast.
The bottom line
Cash offers aren't black magic. The good ones are transparent, math-driven, and honest about the trade-off you're being offered: less paper-value in exchange for speed, certainty, and zero out-of-pocket effort.
If you've gotten a cash offer that didn't make sense, ask the buyer to walk you through the four numbers. If they can't or won't, you're talking to the wrong buyer.
Want us to run the numbers on your property? Submit it here — we'll show you the math.