How offers work
How we calculate an offer
There is no mystery to a cash offer. It is four numbers, and you are entitled to know what they are rather than being handed a figure and asked to trust it.
The four numbers
One: what the house would sell for repaired, in this market, in this neighbourhood. That is the ceiling for everything else.
Two: what the repairs actually cost. Not a guess, a scope. Roof, HVAC, kitchen, bath, flooring, paint, and anything structural or code-related.
Three: the cost of holding the property while that work happens. Taxes, insurance, utilities, and the money tied up.
Four: the margin that makes it worth doing at all. A buyer who works for free does not close twice.
Why the offer feels low
Because it is lower than a retail sale of a repaired house, and it should be. You are being paid for the property as it is today, with the repairs, the holding time, and the risk transferred to someone else.
The fair comparison is not the list price of a fixed-up neighbour. It is what you would actually net after repairs, carrying costs, commissions, and months of uncertainty.
Where we might be wrong
If our repair estimate is pessimistic, the offer is too low and you should say so. With a contractor's number. We revise offers when the scope changes. We do not revise them because a seller wants a higher figure.
A worked example, and it is only an example
Take a house that would sell for $500,000 repaired. The scope (roof, HVAC, kitchen, two baths, flooring, paint, and a few thousand in surprises) comes to $85,000. Holding it for six months costs roughly $25,000 in taxes, insurance, utilities, and the cost of the money.
That leaves $390,000 before anyone is paid for the work. A buyer working on ten percent is at about $350,000. If someone offers you far more than that on a house needing that work, ask what they are assuming, because something in their arithmetic is optimistic.
What to ask any cash buyer
- What after-repair value are you using, and from which comparables?
- What repair scope and cost is behind your number?
- How long do you expect to hold it?
- How do you get paid. Assignment fee, spread, or something else?
Common questions
Is your offer an appraisal?
No. An appraisal is a licensed valuation for a lender. An offer is a business proposal from a buyer, and it is not a valuation of your property.
Will you show me the repair estimate?
Yes, on request. If we are deducting a number from your proceeds, you should be able to see what it is made of.
I have a recent appraisal. Does that help?
Send it. It is useful, as long as it is an appraisal of the house as it sits rather than a desktop estimate. We will still look at the repair scope ourselves, because that is where the difference usually is.
Who pays closing costs?
It is negotiated and it is written into the contract. We normally cover our own side, and the seller-side items are laid out in the offer so you can see the net rather than only the price.
Related
Next step
Tell us the address and what is going on with it. We will look at the property and put a number in writing. Sending a message creates no obligation, and we will say plainly if we are not the right buyer for it.