Last updated October 13, 2026
The offer isn’t random. Every cash buyer, from a local wholesaler to a national “We Buy Houses” brand, uses a version of the same formula. Knowing it tells you where the number came from and whether it’s reasonable. Whether to take the offer at all is a separate question: should you take a cash offer?
They start with the after-repair value (ARV), what the house would sell for fully renovated, and subtract repairs, holding costs, selling costs, a risk cushion and their profit. The common shortcut is 70% of ARV minus repairs.
It’s an investor guideline: pay no more than 70% of the after-repair value, minus estimated repairs. On a home with a $250,000 ARV and $30,000 in repairs, that’s ($250,000 × 0.70) − $30,000 = $145,000. The 30% spread covers the investor’s costs and profit.
The percentages and repair pricing vary, but the structure is the same. Wholesalers, regional investors and national iBuyers all build offers from value minus repairs minus margin, because the model is to buy at a discount and resell at a profit.
Take the $145,000 example above. If that house would sell for $210,000 as-is on the MLS, the seller who takes the offer accepts $65,000 less than market. The formula is designed to work for the investor, not the seller.
Serious investors run the long version. Say a house might resell for $240,000 after updates. The investor expects $38,000 in repairs, $18,000 in resale and closing costs, $6,000 in holding costs and a $12,000 risk cushion, and wants $35,000 in profit. The math lands around $131,000 before negotiation. If a wholesaler adds a $10,000 assignment fee, the offer falls closer to $121,000.
If the same house could list as-is for $175,000 and net $160,000 after commission, concessions, repairs and time, a $121,000 cash offer costs that seller about $39,000, unless the speed and certainty are worth that much to them.
Because the math compresses your value twice. The first compression is the starting number. Investors anchor to ARV and then apply a 70% haircut, and most sellers never learn which value was used.
A St. Louis brick bungalow worth $185,000 as-is might have an ARV of $230,000 fully updated. The investor calculates 70% of $230,000 ($161,000) and then subtracts the full cost of getting it to that $230,000 condition. If they understate the ARV, or overstate what it takes to get there, your offer drops before a single repair is itemized.
The second compression is the repair estimate.
Every dollar added to the repair estimate comes off your offer, so the incentive runs one way. Common patterns I see in St. Louis:
The specific ones. Roof age, foundation movement, sewer lateral problems, water intrusion and deferred maintenance all affect resale value. Vague deductions like “market risk” or “unknown repairs” deserve pushback.
Get independent quotes. Take the investor’s list to one or two local contractors. If their roof number is $18,000 and two contractors quote $10,000 to $12,000, you have documentation to counter. The Cash Offer Decoder also checks repair claims against St. Louis ranges.
Four more deductions: holding costs, transaction costs, profit and, from a wholesaler, an assignment fee.
Usually one of those three, and it matters, because each one gets paid differently:
Yes. Cash offers are starting points, and cash buyers build room into them. Negotiate with documentation and an alternative. Here’s the order I’d work in:
Enter the offer details and the investor’s repair claims. See how the number was built, and what you would net listing on the MLS instead.
Open Cash Offer Decoder →This is one piece of the St. Louis seller decision process. Keep comparing your options before you sign anything.
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Grew up in South St. Louis, lived in Dogtown for 6 years, now in South County. You'll find us at Wellspring on Lindbergh on Sundays. I'm not selling you a house — I'm showing you how to think about buying or selling a house.