The Universal Formula: 70% of ARV Minus Repairs
Every legitimate cash home buyer in the United States uses some version of the same formula: Offer = (After-Repair Value × 70%) − Estimated Repair Costs. The percentage moves between 65% and 80% depending on the market, the speed of resale expected, and the investor's cost of capital, but 70% is the industry-standard anchor.
After-Repair Value, or ARV, is what the property would sell for fully renovated and listed on the open market. Investors pull this from comparable sales of recently-sold renovated homes in the same neighborhood — typically within a half-mile radius, sold within the last 90 days, similar square footage, similar bed/bath count.
Repair costs are the line-by-line estimate of what it will take to bring the property to ARV condition. Roof replacement at $12,000, kitchen remodel at $25,000, HVAC at $7,500, paint and flooring at $15,000 — each repair item gets a contractor estimate and lands in the offer subtraction.
The 30% margin between 70% ARV and 100% ARV covers the investor's profit, holding costs (taxes, insurance, utilities, interest), closing costs on both ends, and a buffer for unexpected repair surprises. Investors who skip the buffer don't last long; the surprises always exist.
A Real Example: $300,000 ARV Home
Take a home with a renovated comparable sale price of $300,000 (the ARV). The property needs $40,000 in repairs to reach that condition. The math works like this:
ARV × 70% = $210,000. Subtract repair costs of $40,000 = $170,000 offer.
If the seller's mortgage payoff is $130,000, they net $40,000 at closing. If the seller owns free and clear, they net the full $170,000.
Compare to a traditional listing at the same ARV: $300,000 list price, minus 6% agent commissions ($18,000), minus typical seller-paid closing costs ($6,000), minus the same $40,000 in repairs the seller would have to complete themselves before listing, minus carrying costs during a 3-6 month sale process ($6,000-$12,000). Net to seller: approximately $224,000-$230,000.
The traditional listing nets $54,000-$60,000 more — but only if the seller can afford to do the $40,000 in repairs, has 3-6 months to wait, and the home actually sells at full ARV. Many sellers can't satisfy those preconditions; the cash sale is the right math for them.
Why the 70% Number Is Not Arbitrary
Investors use 70% as the standard because the math has to work for everyone in the transaction. Hard money lenders, who fund most cash purchases, lend up to 70% of ARV. Below that, the deal is fundable. Above that, the investor has to bring more equity, which kills returns.
The 30% gap also covers risks investors take that traditional buyers don't: buying without contingencies, closing in 7-14 days, accepting any condition including code violations and active damage, paying all closing costs, and absorbing any title or survey surprises that emerge mid-process.
Markets with longer resale timelines see the percentage drop toward 65%. Hot markets where renovated homes sell in 30 days see it move toward 75-80%. Distressed properties requiring complex rehab (foundation, mold, fire damage) see it drop to 60-65%.
Red Flags in the Calculation
Some buyers manipulate the formula to produce artificially low offers. Watch for these patterns:
Inflated repair estimates. A $40,000 kitchen on a home worth $250,000 ARV is unrealistic. Get a contractor quote for comparison. Legitimate cash buyers show their repair math; manipulators won't.
Suppressed ARV comps. If the buyer cites $250,000 ARV when zillow.com shows $310,000 for similar homes, the comp selection is off. Pull your own comparable sales to verify.
Hidden fees that show up at closing. Legitimate cash buyers pay all closing costs. If "administrative fees," "processing fees," or "transaction fees" appear on the settlement statement, the buyer is not who they claimed to be.
Assignment fees as line items. Wholesalers (who don't actually buy themselves, just contract and resell) sometimes try to take a fee from the seller. The end buyer's cash is the only source of seller proceeds in a clean deal.
How to Evaluate Any Cash Offer in 30 Seconds
Take the offer amount. Add your estimated repair costs. Divide by 0.70. That number should approximate the home's after-repair value.
Example: Offer is $170,000. Repairs $40,000. (170,000 + 40,000) ÷ 0.70 = $300,000 implied ARV.
Cross-check that implied ARV against recent comparable sales on Zillow or Redfin. If similar renovated homes in your neighborhood sold for $295,000-$310,000 in the last 90 days, the math is honest. If they sold for $360,000, the buyer is lowballing.
Reverse the test: ask the buyer to share their ARV comps and repair estimate. Legitimate buyers send these on request because they want the seller to understand the math. Buyers who refuse to share are usually hiding suppressed numbers.
Ready for a Real Cash Offer on Your Home?
No fees, no commissions, no repairs. We buy houses nationwide and close in as little as 7 days.
Get Your Free Cash OfferFrequently Asked Questions
Do cash home buyers ever pay full market value?
Rarely, and never on as-is properties. Cash home buyers buy below market value because they take risks traditional buyers don't (any condition, no contingencies, fast close) and they need profit margin to operate. Expect 70-85% of as-is market value for average homes; lower for distressed.
Is the 70% rule a hard ceiling or just a target?
It's a target that adjusts up or down based on the specific deal. Properties with strong resale demand, low repair needs, and fast-moving local markets see offers above 75% of ARV. Properties with significant rehab needs, weak comparable sales, or slow markets see offers in the 60-70% range.
Should I get multiple cash offers to compare?
Yes. Get at least three independent cash offers and compare both the offer amount and the implied math. Significant variation between offers usually means one buyer has better local market intelligence than the others — or one is lowballing. Multiple offers protect you either way.
Can I negotiate a cash home buyer's offer up?
Sometimes, especially if you have competing offers in hand or if the buyer's repair estimate is demonstrably high. Buyers who genuinely want the deal will adjust within their model. Buyers at the floor of their model won't move.
How do cash home buyers fund the purchase?
Most use a combination of personal capital, private lenders, and hard money lenders. Hard money lenders fund up to 70% of ARV at 9-12% interest with 1-3 origination points; cash buyers use this leverage to scale acquisitions. Ask for proof of funds before signing anything.