How Do We Calculate Your Fair Cash Offer?
“How much am I going to get for this house?” This question is usually what everyone is eager to know. For good reason, you want to get a fair price! So here is a breakdown of how we calculate how much we can pay for your house.
We use a simple formula
There are 4 different parts of the formula and we’ll cover what each part means and how we calculate them but let’s first take a look at the overall formula.
The formula we use to make your offer:
[ARV] – [Repairs] – [Trans. Costs] – [Min. Profit] = YOUR OFFER
What does this mean?
Let’s break down each of the 4 different figures one by one, starting from the beginning…
- The After Repair Value (“ARV”), is the price we think we can sell the house for after it’s all fixed up. To find this number, we look at recent sales for similar homes in your neighborhood. Sites like Redfin and Zillow can be useful sources to look for comparable sales but you need to take into consideration that when comparing, be aware of price differences because of improvements and the overall condition of the properties.
- Next is the cost of rehabbing the property (“Repairs”). This is what we estimate it would cost for us to fix your property. We like to do quick, in-and-out rehabs that keep our costs low instead of elaborate jobs – which is how we can pay more than the competition.
- After that, we take into consideration the transaction costs (“Trans. Cost”). If we’re going to resell the house, we need to make sure we give ourselves room for the commissions, closing costs, and holding fees to come, which is usually about ten percent of the ARV.
- Lastly, we determine our minimum profit (“Min. Profit”). Real estate is how we support and provide for our family and if we aren’t profitable, we wouldn’t get to stay in business so this is something we must factor in. Our minimum profit is dependent on the purchase price of the home. The higher we pay for a home, the more profit we need to make to offset the risks.
Let’s put this all together…So we start with what we can potentially resell the house for (“ARV”), then deduct all of the repair costs, deduct the transaction costs and minus our profit… what is left is our maximum allowable offer – what we offer you for your house!
How It Works
- We buy houses without agents, so you will NOT pay commissions!
- We purchase properties in any condition – no matter what’s wrong with the house, you don’t have to fix anything or even clean it.
- We pay for ALL of the closing costs and fees to sell. There are no fees for you whatsoever.
- We can close on your timetable – no matter how fast or slow you need!
- We pay cash for houses – this way there are no hassles like working with a bank and doing inspections or appraisals.