How Cash Home Buyers Calculate Their Offer (and How to Check It)

If you've asked a few cash buyers for offers on the same house, you've probably noticed the numbers can be far apart. That's not random. Nearly every cash buyer starts from the same formula. The differences come from how honestly each one fills it in.

Knowing the math helps you do two things: understand why a cash offer is lower than a retail listing price, and spot an offer that's lower than it should be.

The basic formula

Most offers work backward from what the house will be worth after it's fixed up:

Each line is worth understanding on its own.

1. After-repair value (ARV)

ARV is what the house would likely sell for on the open market once it's updated. It's based on recent sales of similar homes nearby: same general size, age, and neighborhood, ideally sold in the last few months. In Houston that often means staying within the same subdivision, because two homes a mile apart can sit in different school zones, flood zones, or MUDs.

How to check it: Ask the buyer which sales they used. A fair buyer will tell you. You can also ask a local agent for a quick list of recent comparable sales. If their ARV is well below what updated homes on your street have actually sold for, that's where the offer is being squeezed.

2. Repair costs

This is the estimated cost to bring the house up to the level of those comparable sales, such as roof, HVAC, foundation, plumbing, flooring, kitchen and paint. Houston houses have some recurring big-ticket items: foundation movement from expansive clay soil, aging roofs after hail and hurricane seasons, and past water damage.

How to check it: Ask for the repair estimate broken into major items. If you already have contractor bids or an inspection report, share them. A buyer who estimates a full foundation repair when your engineer's report says minor leveling is padding the number.

3. Holding and selling costs

While the house is being renovated and resold, the buyer pays property taxes, insurance, utilities, and financing costs. Then they pay to sell it again: agent commissions, title and closing costs. Together these are a real expense, often a meaningful percentage of the ARV. In areas with high MUD taxes, holding costs run higher.

4. The buyer's margin

This is what makes the risk worth it to the buyer. Renovations run over budget, markets shift, and some houses hide problems behind the walls. The margin covers that risk and pays for the buyer's time and capital. This is the part that varies most between companies. It's also why getting more than one offer is smart.

A simple example

Here's how the math works on a hypothetical house. These are illustrative numbers, not a quote:

• Updated homes nearby are selling for about $300,000 (ARV)
• The house needs a roof, HVAC, flooring and paint: about $45,000
• Holding and resale costs: about $30,000
• Buyer's margin: about $30,000

That works out to an offer around $195,000. That's lower than the $300,000 ARV, but the seller makes no repairs, pays no commission, and has no months of carrying costs. Whether that trade is worth it depends on your situation and timeline. Sometimes it is, and sometimes listing is the better move. We lay out that comparison here.

Red flags in an offer

• The buyer won't explain the number. A legitimate buyer can walk you through their ARV and repair estimate.
• A high offer that drops after you sign. Some buyers win the contract with a big number, then cut it after the inspection period. Ask up front what could change the price.
• Upfront fees. You should never pay a buyer to make you an offer or to "hold" your house.
• No title company. Every sale should close through a licensed title company that handles the money and the deed.

How we do it

When we make an offer, we show you the comparable sales we used and the repairs we're accounting for. If you think we've missed something, like a new roof or recent foundation work, tell us and we'll adjust. You can take the offer, compare it to others, or list with an agent. No pressure either way.