“How does your company come up with the offer for my property?”

This is probably one of the most complex mathematical questions out there… just kidding haha!!!

It’s actually pretty simple:

1. Property ARV

Let’s say a house is worth $150,000, after fixing it up 100% with nice granite counters, brand new appliances, brand new roof & HVAC, etc. (you get the idea). We get this worth/value based on houses that have sold in your area that are comparable to your house. We call these “comps.” 

This is called your “After Repair Value”, which is otherwise known as a house’s ARV.

When we offer cash, we purchase houses at 70% of the ARV. This percentage gives us enough room to make a profit after assuming the time and risk of rehabbing the house into a brand new condition to be sold. We also have to assume our holding costs, realtor fees when we sell and a whole lot more.

** We are able to actually make other, what we call “creative” offers that allow us to offer more for your house than 70% of the ARV minus repairs. We’ll get there 

2. Repairs Needed

Now, in our example of a house being worth $150,000 after being fully renovated to a “brand new” status, let’s assume this house we are buying to fix up needs the following done to it:

• The kitchen is outdated and needs updated.
• There are leaks coming from the roof.
• The whole house needs painted and new flooring too.

Estimated Repairs = ~$25,000.

Now that we know the house’s ARV, as well as the repair costs associated with fixing it up, we can now make our max offer.

3. Our Offer

Here’s our formula when we buy a house for cash:

ARV * 70 % – Repairs = Our Offer

Let’s use the numbers from our example to give you a real life “case study” if you will. 

ARV = $150,000

Repairs = $25,000

$150,000 * 70 % = $105,000

$105,000 – $25,000 = $80,000

On this example property, we’d be able to offer $80,000 in cash!

4. Other Offers We Can Make

In addition to cash offers, we also make some, what we call, “creative” offers to folks that result in actually paying you MORE for your house than the above formula. 

The more time you give us, the more we can pay you.

Here’s how it works: if you own a property free and clear with no mortgages or liens, we’re able to offer a “some now, some later” type of an offer structure where we pay you some money down, while we pay the rest over equal monthly payments. 

If you have an existing mortgage, we can offer you some cash to walk away with, and we’ll take over the responsibility of paying your mortgage payments. 

Folks tend to love accepting these offers because it provides more long-term security for their families, as we pay them much more money over time.

These offers are done on a house-by-house basis because each situation is different, but here’s an example of a deal we structured with someone recently:

Our cash offer to this homeowner was only $65,000, but we were able to offer $80,000 with a creative offer (that’s $15,000 MORE!!!). We gave him $15,000 down, and are making equal monthly payments of $500 to him per month. Our guaranteed monthly payment covers about 75% of this person’s new mortgage at their new place. This seller loved it because it provided peace of mind with their new house.