The Basic Formula

Most cash buyers use a variation of this formula:

Cash Offer = ARV − Repair Costs − Holding Costs − Selling Costs − Profit Margin

Each component plays a role in determining what a buyer can reasonably offer while still making the investment work.

After Repair Value (ARV)

ARV is what the home will be worth after the buyer renovates and resells it. Buyers determine ARV by analyzing recent comparable sales (comps) of similar homes in your neighborhood that are in updated condition.

Repair Costs

The buyer estimates what it will cost to bring the home to market-ready condition. This includes cosmetic updates, mechanical repairs, roof, HVAC, plumbing, and any structural issues. A home in poor condition will have higher repair deductions.

Holding Costs

While the buyer owns the property during renovation, they pay property taxes, insurance, utilities, and financing costs. These typically run 1–3% of the purchase price per month.

Selling Costs

When the buyer resells, they pay agent commissions (5–6%), closing costs, and staging. These are factored into the offer calculation upfront.

Profit Margin

Buyers need to make a return on their investment. Most target 10–20% of ARV as profit, though this varies by market and buyer type.

Example Calculation

• ARV: $350,000
• Repair costs: −$40,000
• Holding costs: −$15,000
• Selling costs: −$21,000
• Profit margin (10%): −$35,000
• Cash offer: ~$239,000

This is why cash offers are typically below retail — the buyer is absorbing all the risk, cost, and work of renovation.

What Improves Your Cash Offer?

• Fewer repairs needed — better condition = higher offer
• Strong comparable sales in your neighborhood
• Flexible closing timeline — buyers may pay more for flexibility
• Getting multiple offers — competition drives prices up