How Cash Home Buyers Calculate Offers (The Actual Math)

Why we publish our math

The single biggest fear homeowners have about cash buyers is the lowball. It's a fair fear — the industry has earned it. The best defense you have as a seller is understanding exactly how a legitimate offer is built, because once you know the formula, you can spot a fair offer (or an unfair one) from anyone, including us.

The four-line formula

Nearly every professional home buyer uses some version of the same calculation:

1. Start with the After-Repair Value (ARV): what your home would sell for on the open market fully updated, based on recent sales of similar nearby homes.
2. Subtract repair and update costs: the itemized cost to bring the home to that condition — roof, mechanicals, kitchens, baths, cosmetics.
3. Subtract transaction and holding costs: property taxes, insurance, utilities, and closing costs the buyer carries while owning and reselling the home.
4. Subtract the buyer's margin: the profit that keeps a buying business running. A legitimate buyer will tell you this number exists; a dishonest one pretends it doesn't.

What's left is the offer. When we present yours, we walk through each line with you — you'll see the comparable sales we used and the repair estimate itemized.

Why a cash offer is below full retail — and when it still wins

A cash offer will almost always be below what a fully renovated version of your home would fetch with an agent. That's not a trick; it's the cost of what you're not doing: no repairs, no cleaning, no showings, no agent commission (typically 5–6%), no seller closing costs, no months of holding the property while it sits on the market, and no risk of a buyer's financing falling through.

For a home that needs significant work, or a seller who needs certainty and speed, the net result after all those avoided costs can come out surprisingly close — sometimes ahead. For a move-in-ready home with time to spare, listing with an agent may genuinely net you more, and an honest buyer will tell you so.

How to spot an unfair offer

• No explanation. If a buyer won't show you their repair estimate or comparable sales, walk away.
• Pressure tactics. "This offer expires tonight" is a red flag. A fair number is still fair next week.
• The re-trade. Some buyers offer high, then slash the price days before closing when you're committed. Ask any buyer whether their offer is final after inspection, and get it in writing.
• Fees appearing later. A legitimate direct buyer charges no commissions or fees. The number on the contract is the number you receive.

Frequently asked questions

See how this works in practice: real Rochester success stories.