Process
How Cash Home Buyers Calculate Their Offers (The Real Math)
One of the most common — and fair — questions homeowners ask about cash offers is: "How did you come up with that number?" Too many "we buy houses" operators treat their math like a secret. We don't think it should be. When you understand how a cash offer is actually calculated, you can evaluate any offer with clear eyes and know whether it's fair. Here's the real math.
Step 1: After-Repair Value (ARV)
ARV is what your home would be worth fully fixed up and sold on the open market. An investor estimates it by looking at recent sales of comparable, renovated homes in your neighborhood — same size, similar lot, similar style. This is the foundation of the whole offer, so it pays to know your own comps. If an investor's ARV seems low, ask which comparable sales they used.
Example: if renovated homes like yours are selling for $400,000 in your area, your ARV is roughly $400,000 — regardless of your home's current condition.
Step 2: Estimated repair costs
Next, the investor estimates what it will cost to bring your home up to that after-repair value: roof, systems, kitchen, bath, flooring, cosmetics, whatever's needed. These costs come straight off the offer because the investor will actually spend that money. A home in great shape has low repair costs (so a higher offer); a home needing a full renovation has high repair costs (so a lower offer). This is why as-is condition directly drives your number.
Example: if your home needs $60,000 of work to reach that $400,000 ARV, that $60,000 comes out of the calculation.
Step 3: The percentage (the investor's margin)
The investor applies a percentage to ARV — commonly somewhere in the 70-85% range — before subtracting repairs. That margin isn't pure profit. It has to cover a lot:
- Holding costs: mortgage/financing, property taxes, insurance, and utilities for the months they own it during the renovation.
- Transaction costs: closing costs on both the purchase and the eventual resale, including agent commission when they sell.
- Risk: repairs almost always uncover surprises, and the market can shift while they hold the property.
- Profit: the reason they're in business. A reasonable profit margin is legitimate — it's what makes the fast, as-is, no-fee purchase possible for you.
The stronger your local market and the lower the risk, the higher the percentage an investor can offer. Hot markets push toward 80-85%; riskier or slower markets pull toward 70%.
Putting it together
Using our example — $400,000 ARV, $60,000 in repairs, and an 80% factor: 0.80 × $400,000 = $320,000, minus $60,000 in repairs = a cash offer of roughly $260,000. That's the kind of math behind a real offer.
How to use this to evaluate an offer
- Ask the investor what ARV they used and which comparable sales support it.
- Ask roughly what repair budget they assumed. If it seems inflated, push back.
- Compare the implied percentage to the 70-85% range — well below 70% may be a lowball.
- Run your own rough math: what would you actually net selling traditionally, after all costs and time?
A trustworthy buyer will happily walk you through their numbers. One who won't explain the math is a yellow flag.
How Bisonkey approaches offers
The investor-buyers in our network base offers on real local comps and honest repair estimates, and they'll explain how they got to the number. Because we work with one vetted local buyer per market — someone who actually knows your area's comps — the ARV is grounded in reality, not guesswork from out of state. You can request a no-obligation offer and ask exactly how it was calculated.
Bottom line
A cash offer isn't a random number or a pure lowball — it's ARV, minus repairs, adjusted by a margin that covers real costs and risk. Once you understand the formula, you can tell a fair offer from a bad one, ask the right questions, and decide with confidence whether the speed and certainty are worth it for you.