How Cash Home Buyers Calculate Their Offer in California

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Calculator and paperwork used to price a cash home offer

A cash offer isn’t a guess, and it isn’t built off the same number your neighbor’s house listed for. It’s a formula: after-repair value, minus repair costs, minus the buyer’s holding costs and margin. Once you know the formula, you can tell whether an offer is fair or whether you’re being lowballed — and you can ask the questions that force a buyer to show their work.

The Formula Most Cash Buyers Actually Use

Most investor-buyers start from a version of the same equation: offer equals after-repair value (ARV) multiplied by a target percentage, minus estimated repair costs. The percentage is often quoted as “the 70% rule,” but in practice it moves with the market — tighter inventory and low competition push it higher, a slow market or a buyer with a full pipeline pushes it lower. The ARV itself comes from recent comparable sales within roughly a half-mile and the last three to six months, adjusted for square footage, bedroom count, and lot size — the same comps an appraiser would pull.

That percentage isn’t pure profit. It has to cover the buyer’s holding costs (property tax, insurance, utilities, and loan interest if they’re using capital), the resale transaction costs when they eventually sell, and a margin for the risk that repairs run over budget. A buyer with efficient operations and cheap capital can offer a higher percentage than one carrying a lot of overhead — which is part of why offers vary between companies for the identical house.

What Actually Gets Counted as a “Repair Cost”

Reasonable repair estimates are itemized: roof, HVAC, foundation, plumbing, electrical, and cosmetic work (paint, flooring, fixtures) each get a line item, usually based on a walkthrough or detailed photos. A number that isn’t itemized — just a flat, round deduction — is the first sign an offer wasn’t built from an actual inspection.

  • Ask for the itemized repair list, not just the total deduction
  • Ask which comparable sales were used for the ARV, and confirm they’re genuinely comparable
  • Ask what percentage of ARV the offer represents, and why

Why the Offer Isn’t the Same as Market Value

A cash offer trades price for speed and certainty. There’s no financing contingency to fall through, no appraisal gap to renegotiate around, no buyer walking after a 30-day listing period with no offers. For a seller under real time pressure — foreclosure, an estate that needs to close, a job relocation on a deadline — that trade is usually worth it. For a seller with no time pressure and a house in solid condition, listing traditionally will typically net more, even after commissions.

Red Flags That Signal a Lowball, Not a Real Offer

  • No proof of funds provided when asked
  • The offer changes significantly after “inspection” with no itemized reason
  • Pressure to sign same-day, before you can compare another offer
  • A verbal number that’s never put in writing

When a Cash Offer Isn’t Your Best Option

If the house is in good condition, you have substantial equity, and you’re not under a real deadline, a traditional listing will usually out-earn a cash offer — the discount exists specifically to compensate for speed and certainty you may not need. A cash sale is the right tool for a specific problem, not a default.

This is general information, not financial or legal advice — every property and market is different. For more on how the overall process works, see our breakdown of how cash home sales actually work. If you’d like an itemized, no-obligation cash offer on your California property, Cash Home Buyers CA will show you the comps and repair estimate behind the number.