The first question most people ask when they get a cash offer is "How did you come up with that?" It's a fair question. A cash offer on a house that needs work is usually lower than what the house might sell for after it's fixed up, and you deserve to know why.
Here's how we build our offers. Most serious cash buyers use some version of the same math, so this should help you check any offer you get, not just ours.
Step 1: What the house would be worth fixed up
Buyers call this the after-repair value, or ARV. It's what the house would likely sell for on the open market once it's updated and in good shape.
To estimate it, we look at recent sales of similar homes nearby that are already in good condition: similar size, bedrooms, bathrooms, lot and neighborhood. We lean on recent closed sales, not asking prices, and we're careful with outliers. A single sale with a pool, a view or a big addition can make a neighborhood look more valuable than it is.
This is the number to ask about first. If a buyer's ARV is way off, everything after it is off too.
Step 2: What it will cost to fix
Next comes the repair budget. That includes the big items, like roof, foundation, sewer line, plumbing, electrical, HVAC and termite work, and the updates buyers expect in a resale home: paint, flooring, kitchen and bathrooms, fixtures and landscaping.
Because we do our own renovations, we know what these things really cost in the Inland Empire. We'd rather walk the house with you than guess from photos, because things like a sagging floor or a water stain on the ceiling change the budget a lot.
Step 3: The costs of buying, holding and reselling
This is the part sellers often forget. Between buying a house and reselling it, a buyer pays:
- Closing costs on the purchase: escrow, title, recording and transfer taxes, depending on how the costs are split.
- Holding costs during the work: property taxes, insurance, utilities, HOA dues and financing costs.
- Selling costs on the resale: agent commissions, escrow and title fees, buyer credits, and the time it takes to sell.
These add up, and they're real money whoever owns the house. If you list a house yourself, you pay many of the same costs.
Step 4: The margin
A buyer also has to make a profit for the time, work and risk involved. Renovations go over budget. Markets shift. Sometimes a wall comes down and there's a problem nobody could have seen. The margin covers that risk and keeps the business running.
Put it all together, and the basic formula looks like this:
After-repair value − repairs − buying, holding and selling costs − margin = cash offer
Every buyer weighs these pieces a little differently, which is why offers on the same house can vary. But if a buyer can't explain each piece, ask why.
What a cash offer saves you
A cash offer usually looks lower than a listing price, but the two numbers aren't apples to apples. With a cash sale as-is, you're not paying for repairs, staging or months of mortgage, taxes and utilities while the house is on the market, and you don't pay us a commission. A listing can still net you more, especially if the house is in good shape and you have time. Our post on what selling a house really costs lays out both sides so you can compare on your own numbers.
Why an offer can change, and why ours doesn't
A number on paper only matters if it holds up at closing. Some buyers make a high offer to get the contract signed, then cut the price right before closing, often pointing to repairs that were obvious from the start. Others are middlemen who sign the contract and then try to sell it to another buyer. If they can't find one at that price, the price drops. Our guide to telling a real cash buyer from a middleman explains how to spot it.
Our offer is the price we pay at closing, unless the inspection finds something we didn’t know about, and we’ll show you why. That's why we walk the house before we make a written offer: so the number is based on what's actually there.
How to check any cash offer
- Ask what they think the house is worth fixed up, and which recent sales they used.
- Ask for the rough repair budget, and the biggest items in it.
- Ask which closing costs you pay and which they pay.
- Ask when the price could change, and get the answer in writing.
- Ask whether they are the ones buying the house, and whose name goes on the deed.
- Compare at least one listing estimate from a local agent so you know your alternative.
Write the answers down and compare offers side by side. The highest number isn't always the best offer if it comes with long inspection periods, a tiny deposit or a buyer who can't explain their math.
How we share our numbers
When we send you a written offer, usually about 24 hours after we have the property details, we'll walk you through how we got there: what we think the house will be worth fixed up, what we expect to spend on it, and our costs. If you think we've missed something, like a recent roof or a comparable sale we didn't consider, tell us. We'll take another look.
There's no obligation and no pressure. If our number doesn't work for you, you can list the house or take another offer, and if the house isn't a fit for us, we'll say so and help you find a better route. Call (909) 833-4848 or get your cash offer. You can also read how the whole timeline works in How Our 24-Hour Cash Offer and 7-Day Closing Work.
We buy houses as-is across San Bernardino County, Riverside County, Los Angeles County and Orange County, including San Bernardino, Fontana, Riverside and Pomona.
This article is general information, not legal, tax or financial advice. Every situation is different, so talk to a real estate attorney, CPA or other qualified professional about yours.