Cash home buyers work backward from what your home would be worth after it’s fixed up. That number is called the after-repair value, or ARV. They multiply the ARV by a percentage (typically 65–85%), then subtract their estimated repair costs. The result is your offer.
The formula looks like this: Offer = (ARV x Percentage) − Estimated Repair Costs.
That number isn’t random, and it isn’t a guess. Once you understand the math behind it, you can check any buyer’s work in about 60 seconds. This article shows you how, with real numbers, a line-item breakdown of where the “discount” actually goes, and a checklist to separate a fair offer from a lowball.
If you’ve already gotten an offer that felt low, you’re not alone. Most sellers have that reaction. But the gap between a cash offer and what you’d actually net after a traditional sale is usually much smaller than the sticker price suggests. We’ll show that math, too.
The Formula Behind Every Cash Offer
Most cash home buyers use some version of this formula:
Offer = (ARV x Percentage) − Estimated Repair Costs
Here’s what each piece means in plain English.
ARV (After-Repair Value): What your home would sell for on the open market if it were fully updated and move-in ready. Not your Zestimate. Not what you paid. What recently renovated comparable homes near you actually sold for.
The percentage (65–85%): This is the buyer’s “buy box,” the portion of the future value they’re willing to pay now. The remaining 15–35% is their buffer for holding costs, resale expenses, risk, and profit. We break this down in detail below.
Estimated repair costs: What it would take to bring the property to that ARV condition. Roof, HVAC, kitchen, bathroom, flooring, paint, structural repairs, and everything in between.
A Worked Example
Say your home’s ARV is $280,000 (comparable renovated homes in your area sold for that amount), the buyer’s percentage is 75%, and estimated repairs total $30,000.
Offer = ($280,000 x 0.75) − $30,000 = $180,000
That’s a starting point, not a ceiling. Different buyer types, property conditions, and market dynamics all shift the percentage and repair estimate, which is why offers on the same house can vary by tens of thousands of dollars.
One thing worth knowing: Eagle Cash Buyers calculates offers based on the property’s condition, location, and the current market, and the offer is a net amount. Eagle covers all customary closing costs and applicable agent commissions. The number you see is the number you keep. You can learn more about how Eagle’s process works.
What This Looks Like on an Actual Call
In one Eagle transaction, a woman called on behalf of her husband about an inherited property, an approximately 894-square-foot home. She wasn’t browsing. She was comparison shopping: “I’m just calling around to all the different places that can give me fast cash offers and see who’s the highest bidder at this point.” She already had a $50,000 offer from another company.
The Eagle acquisition manager didn’t just name a number. He showed his work, live on the phone. He started with the property’s estimated market value (around $114,000, based on comparable data, while the seller had it listed at $120,000 on Zillow). He subtracted estimated renovation costs of $35,000 to $40,000, calculated at roughly $30 to $35 per square foot. Then he subtracted approximately 15% for the resale costs the company would absorb (closing costs and commissions when the home eventually sells), plus a margin.
The resulting offer was $55,000, above the $50,000 she’d already been quoted. She pushed back hard, and she had every right to: “Oh, no, sir. If you’re going to come at me like that, then I may as well just hang up the phone.” Her position was that the lot alone was worth far more and a renovated house could fetch significantly higher. She’d been following her local market for six years and had a friend who’s a local real estate agent lined up to check the math.
That’s exactly what a seller should do. The point isn’t that every seller should accept the first number. The point is that the math was on the table, and she could verify it herself, which brings us to the formula most investors treat as the starting line.
What Is the 70% Rule, and When Does It Actually Apply?
The “70% rule” is a rule of thumb used mainly by house flippers: never pay more than 70% of ARV minus repairs. It’s widely quoted in investor circles, but it’s a screening tool, not an ironclad rule every buyer follows.
The formula: MAO = ARV x 0.70 − Repair Costs
MAO stands for Maximum Allowable Offer. Worked example: if ARV is $300,000 and estimated repairs are $45,000, then MAO = ($300,000 x 0.70) − $45,000 = $165,000.
Where the 70% Rule Works
This formula works best for properties that need heavy renovation in average-demand markets. It gives the buyer enough margin to absorb cost overruns, holding expenses, and the risk of a slow resale. For a standard fix-and-flip deal with a six-figure renovation budget and a four-to-six month timeline, 70% is a reasonable guardrail.
Where the 70% Rule Breaks Down
Most articles present the 70% rule as universal. It’s not. Here’s where experienced buyers adjust it:
Low-ARV properties (under about $150,000): 30% of $150,000 is only $45,000. After repairs, closing costs, and holding expenses, there may not be enough margin to justify the project. Many investors drop to 60–65% on lower-value homes to protect their numbers.
High-value markets ($500,000+ ARV): A strict 70% on a $600,000 ARV produces a $420,000 offer before repairs. In dollar terms, the margin is large enough that experienced buyers may move to 75–80%. The percentage shifts, but the dollar buffer still works.
Light-repair or move-in-ready homes: When repair costs are minimal, some buyers go up to 80–85%. Less renovation risk means the buyer doesn’t need as wide a cushion.
The takeaway for sellers: the 70% rule is a useful benchmark, but don’t assume every offer must hit it exactly. The real question is whether the buyer can show you how they reached their number, the way the acquisition manager did in the transaction above.
What the 30% Buffer Actually Pays For (the Part Nobody Breaks Down)
Sellers hear “30% below market value” and assume it’s all profit for the buyer. It’s not. Here’s where the money actually goes, on a $300,000 ARV example. (Repair costs are subtracted separately before the offer, so they’re not in this table.)
| Cost Category | Typical Range | On a $300K ARV |
| Buyer’s closing costs on purchase | 1–2% | $3,000–$6,000 |
| Holding costs (taxes, insurance, utilities during rehab) | 2–4% | $6,000–$12,000 |
| Resale agent commissions when buyer sells | 5–6% | $15,000–$18,000 |
| Buyer’s closing costs on resale | 1–2% | $3,000–$6,000 |
| Unexpected cost overruns / contingency | 2–3% | $6,000–$9,000 |
| Buyer’s profit margin | 8–15% | $24,000–$45,000 |
| Total | 19–32% | $57,000–$96,000 |
When you add those up, 30% is tight, not greedy. In some deals, the margin is thinner than the buyer would like. That’s why offers that seem low aren’t necessarily unfair. They reflect real costs the buyer absorbs that you don’t have to deal with.
Not Every Cash Buyer Uses the Same Math
Different types of cash buyers have different business models, which means the same house can produce wildly different offers. Understanding the buyer type explains the price.
Fix-and-Flip Investors
These buyers use the ARV formula most strictly. They need margin for renovation plus resale, and their offers typically fall at 65–75% of ARV minus repairs. They’re evaluating whether they can buy, renovate, and sell the property at a profit within a set timeline, usually six to nine months.
Buy-and-Hold (Rental) Investors
Rental investors don’t care as much about resale. They evaluate based on rental income versus purchase price, using metrics like cash-on-cash return and cap rate. A home that’s a bad flip deal might be a great rental deal, which means a landlord buyer may offer more than a flipper for the exact same property.
iBuyers
Companies like Opendoor and Offerpad use algorithmic pricing close to market value minus a service fee (typically 5–10%). They tend to focus on homes in good condition in metro markets. The math is completely different from the ARV formula because these companies aren’t planning renovations. They’re essentially acting as market makers.
Companies That May Use Partner Networks
Some buyers, including Eagle Cash Buyers, may purchase directly or work with an affiliated or local investment partner depending on the property and the seller’s goals. The offer structure may vary based on the transaction type. Either way, Eagle covers customary closing costs and applicable agent commissions, and the seller pays no agent fees. You can get a no-obligation offer from Eagle here.
Key takeaway: this is why getting two or three offers matters. Different buyer types will price the same house differently. The seller in the Eagle transaction above was doing exactly the right thing by calling multiple companies and comparing numbers.
How Cash Buyers Figure Out Your ARV (and How You Can Check It)
Cash buyers estimate ARV by pulling comparable sales, commonly called “comps.” These are recently sold homes near you that are similar in size, age, and condition after renovation. You can do the same thing in about 10 minutes.
How the Buyer Pulls Comps
Buyers typically look at homes that sold in the last 60 to 90 days, within a half-mile to one-mile radius, with similar bedroom and bathroom count and square footage. The key filter: the comps should be in updated, move-in-ready condition at the time of sale. The buyer adjusts for differences like lot size, extra bathrooms, a pool, or a garage.
How You Can Pull Your Own Comps in 10 Minutes
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Step 1: Go to Zillow, Redfin, or Realtor.com and filter to “sold” (not active listings), within the last 90 days, in your ZIP code.
Step 2: Find three to five recently renovated homes similar to yours in size, layout, and bedroom/bathroom count. Note the sold prices.
Step 3: Average those sold prices. That’s your rough ARV. Compare it to the ARV the buyer quoted you. If they’re within about 5%, the comp work is sound. If they’re significantly off, ask which specific comps they used.
Common ARV Mistakes Sellers Make
- Using active listing prices (asking prices) instead of actual sold prices. What a seller hopes to get and what a buyer actually paid are often very different numbers.
- Comparing to homes in very different condition. If your home needs $40,000 in work, a fully renovated comp across the street isn’t a fair comparison for your current value. It is, however, exactly what a buyer uses to estimate your ARV.
- Ignoring location differences within the same ZIP code. A home on a busy road or next to a commercial lot may sell for less than an otherwise identical home on a quiet street.
How Cash Buyers Estimate Repair Costs
The repair estimate is the second-biggest factor in your offer, and it’s where the most legitimate disagreement happens between buyers and sellers. If you’re selling an older or outdated house, it helps to understand what the buyer is actually pricing in.
During a walkthrough or virtual assessment, buyers evaluate the major systems and components: roof age and condition, HVAC, foundation, electrical and plumbing, kitchen and bathroom condition, flooring, paint, and exterior or curb appeal.
Why the Buyer’s Repair Number Is Usually Higher Than Yours
Buyers price repairs at contractor rates, not DIY costs. They include a contingency of 10–15% of the repair budget for surprises (and surprises are common, especially in older homes). They also factor in permit costs for structural or system work. A seller who thinks “the kitchen just needs paint” may not realize the buyer is planning a full update to hit the ARV.
In the Eagle transaction described above, the acquisition manager estimated $30 to $35 per square foot in renovation costs. On an 894-square-foot house, that came to $35,000 to $40,000. That kind of per-square-foot pricing is common in the industry, though the exact rate varies by market and property condition.
How to Sanity-Check the Repair Estimate
Ask the buyer for a line-item breakdown. If they can’t provide one, that’s a red flag. A legitimate buyer should be able to tell you what they plan to spend on the roof versus the kitchen versus the HVAC. You can also get a free quote from a local general contractor to compare. The numbers won’t match exactly (different scopes, different contractors), but they should be in the same ballpark.
What You Actually Net: Cash Offer vs. Traditional Sale
The gross price gap between a cash offer and a listed sale looks big. The net gap, what you actually walk away with, is often much smaller once you subtract commissions, repairs, staging, carrying costs, and the risk of a deal falling through.
Here’s a side-by-side comparison for a home with a $280,000 ARV:
| Cash Sale (Eagle) | Traditional Sale (Agent) | |
| Sale price | ~$180,000 (example) | ~$265,000 (after negotiation) |
| Agent commissions | $0 (Eagle covers) | ~$15,900 (6%) |
| Seller’s closing costs | $0 (Eagle covers customary) | ~$5,300 (2%) |
| Repairs before listing | $0 (sell as-is) | ~$25,000 |
| Staging + photography | $0 | ~$2,500 |
| Carrying costs (3–5 months on market) | $0 | ~$8,000–$14,000 |
| Risk of deal falling through | None (cash, no financing contingency) | ~15–20% of financed deals fall through |
| Approximate net proceeds | ~$180,000 | ~$202,300–$216,300 |
The traditional sale often does net more, but the gap in this example is typically $20,000 to $35,000, not the $85,000 the gross prices suggest. And that gap comes with months of effort, upfront repair investment you may not have, and the real possibility of a buyer’s financing falling through.
For sellers who need speed, certainty, or can’t afford to invest in repairs upfront, the cash path often wins on a risk-adjusted basis. That said, if you have time, money for repairs, and tolerance for uncertainty, a traditional sale may net you more.
Note: Eagle’s offer is a net amount. No hidden costs eating into the number. You can read more about how to negotiate with a cash buyer to make sure you’re getting the best deal possible.
How to Spot a Lowball vs. a Fair Cash Offer (60-Second Check)
A fair offer has math behind it. A lowball has pressure. Here’s how to tell the difference in about a minute.
- Ask for the ARV and the comps. A legitimate buyer will tell you which sold homes they used and what ARV they estimated. If they can’t or won’t, that’s a red flag.
- Ask for the repair estimate breakdown. You want line items, not a lump sum. A buyer who says “the house needs $50,000 in work” without being able to itemize it hasn’t done their homework.
- Check the range. Does the offer fall in the 65–85% of ARV range? If it’s below 60%, push back or get competing offers.
- Verify proof of funds. Ask for a bank statement or proof-of-funds letter dated within 30 days. Any buyer who won’t show this may not actually have the cash to close.
- Check who holds earnest money. It should go to a neutral title company or closing attorney, never directly to the buyer.
- Get two or three offers. This is the single most effective way to ensure a fair price. Different buyers will price the same property differently based on their business model, as we covered above.
If you’re wondering whether a particular company is trustworthy, Eagle Cash Buyers has a BBB A+ rating and has completed over 1,000 transactions across 44 states. You can read Eagle’s reviews and testimonials from real sellers.
Frequently Asked Questions
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How much do cash home buyers typically offer?
Cash buyers typically offer 65–85% of a home’s after-repair value, minus estimated repair costs. The exact percentage depends on the property’s condition, location, local market demand, and the buyer’s business model. Homes in better condition or higher-demand areas tend to receive offers at the higher end of that range.
What is the 70% rule in real estate?
The 70% rule is a formula investors use to determine their maximum allowable offer: MAO = ARV x 0.70, minus repair costs. It’s a screening tool designed mainly for fix-and-flip projects, not an absolute rule. Many experienced investors adjust the percentage up or down depending on the property value and repair scope.
What is after-repair value (ARV)?
ARV is what your home would sell for on the open market after full renovation, based on recently sold comparable homes in your area. It’s the starting point for nearly every cash offer calculation. Buyers determine ARV by analyzing comps, typically homes that sold in the past 60 to 90 days within a close radius of your property.
Why is a cash offer lower than market value?
The buyer absorbs repair costs, closing costs on both purchase and resale, holding costs during renovation, resale agent commissions, a contingency for unexpected problems, and their profit margin. The “discount” covers all of those costs. When you compare the net proceeds (not just the sale price), the gap between a cash offer and a traditional sale is usually much smaller than it first appears.
How can I check if a cash offer is fair?
Pull your own comps on Zillow, Redfin, or Realtor.com (sold homes, not active listings) to estimate your ARV. Ask the buyer for their ARV estimate, the specific comps they used, and a line-item repair breakdown. Then check whether the offer falls in the 65–85% of ARV range. Getting two or three competing offers is the most reliable way to validate any single number.
Does Eagle Cash Buyers cover closing costs?
Yes. Eagle covers all customary closing costs and applicable agent commissions. The offer you receive is a net amount, meaning the number you agree to is the amount you walk away with (minus only your own mortgage payoff and any liens against the property). You can get a cash offer from Eagle here.
How fast can I close with a cash buyer?
Eagle Cash Buyers typically closes within 21 to 42 days, depending on title readiness and property review. Some other cash buyers may quote faster timelines, but actual closing speed depends on how quickly title work clears, especially if there are liens, probate, or deed issues to resolve. Eagle handles the title and closing coordination on the seller’s behalf.
Ready to See What Your Home Is Worth to a Cash Buyer?
Now you know the formula. You know where the numbers come from, what the 30% buffer actually covers, and how to check any buyer’s math in about a minute.
If you want to see what Eagle Cash Buyers would offer on your property, the process starts with your address. Eagle evaluates properties across 44 states, covers all customary closing costs, and typically provides an initial offer within minutes to a few hours during business hours. No repairs, no cleaning, no showings. Submit your property for a free cash offer, or call (833) 330-1625 to talk with someone directly.
And if you’re comparing offers, good. That’s exactly what a confident buyer wants you to do.
