Every cash offer, ours included, comes down to the same basic formula. Understanding it removes most of the mystery from a number that can otherwise feel like it came out of nowhere.

The Formula Itself

After Repair Value multiplied by a target percentage, minus repair costs, minus holding and selling costs, equals the offer. That is the whole structure. Everything else is just detail filling in each piece.

After Repair Value: The Starting Point

This is what the property would sell for on the open market once brought to good, updated condition, based on actual recent comparable sales of similar properties nearby. This number sets the ceiling everything else gets calculated against.

The Target Percentage: Why It Is Not 100

A buyer is not paying full market value, since they are taking on the property’s condition risk, the cost of capital, and the time and expense of eventually reselling or renting it. This percentage typically lands somewhere in the 70 to 85 percent range of After Repair Value, before repair costs even get subtracted.

Repair Costs: The Line Item With the Most Variance

This reflects actual, current contractor pricing for whatever the property genuinely needs, a roof, updated systems, cosmetic work. This is the piece most likely to shift an offer meaningfully in either direction between two different buyers evaluating the same property.

Holding and Selling Costs: The Piece Homeowners Forget

Property taxes, insurance, utilities, and eventual resale costs during the buyer’s ownership period all factor in here, expenses a seller does not think about but a buyer absolutely has to.

Putting Real Numbers to This

A property with an After Repair Value of $300,000, at 75 percent, comes to $225,000. Subtract $20,000 in needed repairs and $15,000 in holding and selling costs, and the offer lands around $190,000.

Why Two Buyers Land on Different Numbers From This Same Formula

Each input can vary slightly, a different comparable sales selection, a different repair estimate, a different target percentage based on business model. How many comparable sales are enough to trust a number explains one of the biggest sources of that variance in more detail.

Why Knowing This Formula Actually Helps You

Once you understand the structure, you can ask a buyer specifically which numbers they used for each piece, turning an opaque total into something you can actually evaluate and, where reasonable, push back on with real information.