One of the most common questions we hear from agents is, 'How did you land on that number?' A legitimate cash offer isn't a guess — it's built from a straightforward formula real estate investors have used for decades.
After-Repair Value (ARV) is what your client's home would likely sell for on the open market once fully repaired and updated to match comparable homes nearby. We estimate ARV by pulling recent comparable sales — homes similar in size, age, and location that sold recently in fully updated condition.
The formula: ARV − Estimated Repair Costs − Buyer's Required Return = Cash Offer. The 'required return' covers the buyer's holding costs, closing costs, and the margin needed to make the purchase and eventual resale financially viable.
Say a fully updated home like yours would sell for $250,000 (the ARV). The home needs about $40,000 in repairs. The buyer's required return is roughly $30,000. $250,000 − $40,000 − $30,000 leaves an offer around $180,000. Every number in that equation is something you can ask a buyer to show you.
Because the formula is transparent, you can ask any cash buyer to walk you through their comps and repair estimate. If a buyer won't explain their numbers, that's a red flag. A fair offer should make sense on paper — not just feel like a number pulled out of thin air.