The Basic Formula
Most cash investors use a variation of this calculation:
Maximum Offer = After Repair Value (ARV) × 70% − Estimated Repair Costs
This is sometimes called the "70% rule." Here's what each piece means:
After Repair Value (ARV)
What the home will be worth after it's fully renovated and updated. Buyers determine this by looking at comparable sales (comps) of renovated homes in your neighborhood that sold in the last 3–6 months.
Estimated Repair Costs
What it will cost to bring the property up to market condition. This includes cosmetic updates (paint, flooring, fixtures) as well as any major repairs (roof, HVAC, foundation, plumbing).
The 70% Buffer
The gap between the offer and ARV covers the buyer's profit margin, holding costs (insurance, taxes, utilities during renovation), transaction costs (closing, commissions on resale), and unexpected repair overruns.
A Fresno Example
Say your home's ARV is $300,000 and it needs $40,000 in repairs:
- ARV: $300,000 × 70% = $210,000
- Minus repairs: $210,000 − $40,000 = $170,000
- Cash offer range: ~$170,000
What Reputable Buyers Will Tell You
A trustworthy cash buyer will walk you through their ARV estimate and repair assessment so you understand the offer. Buyers who refuse to explain their numbers are worth being cautious about.
You don't have to accept the first offer you receive. Get two or three offers and compare — the process costs you nothing.
Is the Discount Worth It?
For many sellers, yes — when you factor in the savings from no agent commissions (typically 5–6%), no repair costs, no carrying costs during a 60–90 day listing, and the certainty of a cash sale, the math can be surprisingly close.