Before we delve into the price, we need to make a distinction between a “retail sale” and a “cash offer”. A retail sale is when a house is sold on the MLS with a realtor. This typically yields the highest sales price, and may be the best solution when the house is in good condition and the seller has sufficient time to wait for it to be sold. Cash offers are quick and easy, but they are typically lower than retailer offers for the reasons stated below.

The equation for calculating our offer is simple, where:

Offer Price = ARV – Renovation Costs – Holding Costs – Selling costs – Our Costs

The After Repair Value (ARV) is the amount a property is expected to sell for after all renovations are made and it’s sold on the MLS with a realtor. This value can be obtained by examining similar houses nearby that have recently sold.

Renovation Costs are the total expenses required to repair or replace anything that is broken or outdated. Through the years, we’ve spent as little as $5,000 and as much as $100,000 to renovate each property, but typically they’re near the middle.

Holding Costs include all the expenses paid just to own the property. Renovations can take 3 to 4 months to complete, plus an additional 1 to 3 months to sell the property. During this time, property taxes, mortgage payments, insurance and utilities bills all have to be paid. In total, these expenses can cost up to 5% to 6% of the ARV.

Selling Costs include all of the expenses incurred to buy and sell a home. Realtor expenses are the most significant, ranging from 5% to 7% of the ARV. Other expenses include title fees, appraisals and inspections which add up to another 4% of the ARV.

Our Costs cover everything else. This includes overhead, renovation management, renovation expense overages, market fluctuations, and if we’re lucky, a profit. Depending on the property, these costs can range from 8% to 13%.

In summary, “Cash Offers” can range from 25% to 30% of the ARV, minus the cost of renovations. We realize this isn’t an ideal solution for everyone, but if you are interested in a cash offer, than please contact us.