How Is a Cash Offer on a House Calculated?
Every cash offer is the same arithmetic. Knowing the four inputs is how you tell a fair offer from a bad one.
Cash offers can feel arbitrary when you receive one, but they are not. Nearly every buyer in this business runs the same four-part calculation, and once you can see the parts you can judge whether a number is reasonable or whether someone is hoping you will not ask.
What is the basic formula?
After-repair value, minus the cost of repairs, minus the costs of holding and reselling, minus the buyer's margin. What is left is the offer. Everything that makes one offer differ from another is a difference of opinion about one of those four inputs.
What is after-repair value and how is it set?
It is what the house would sell for, on the open market, once it is in normal saleable condition. It is established from recent sales of genuinely comparable properties nearby — similar size, similar age, similar layout, and close enough to share the same buyer pool.
This is the input most worth questioning. If a buyer's after-repair value looks low against what similar houses on your street have actually sold for, ask which comparables they used. A buyer working from real sales will tell you; one working from a formula will change the subject.
How are repairs estimated?
Against what a retail buyer would expect, not against what you could live with. That gap is where most disagreement sits. Owners price repairs at what it would cost them to make the house acceptable; a buyer prices them at what it costs to make it sell at the after-repair value they just quoted.
Roof, foundation, plumbing, electrical and HVAC dominate. Cosmetic work matters less than people expect, and structural work matters more.
What are the holding and selling costs?
The ones sellers rarely think about, because in a normal sale they are the buyer's problem later. Taxes and insurance during the renovation, utilities, financing cost if the buyer is using capital that is not free, and then the cost of selling it again — agent commission, title, closing costs.
These are real and they are not small. On a Texas property, taxes alone across several months of renovation are a meaningful line.
Why is there a margin at all?
Because the buyer is taking on the risk you are handing over. If the roof turns out worse than it looked, if the market moves during the renovation, if the plumbing under the slab is broken, that lands on them. The margin is the price of transferring those unknowns.
A buyer who claims to work on no margin is either not telling the truth or not going to close. Both are worse than an honest number.
Why do two cash offers differ so much?
Usually the repair estimate or the after-repair value, occasionally the margin. It is worth getting more than one offer for exactly this reason, and worth asking each buyer to show the four inputs rather than just the total. A buyer who will break the number down is telling you something about how they operate.
Be wary of the highest offer that arrives without a walkthrough. An offer made before anyone has assessed repairs has not costed the repairs, which means it can only move downward later.
What should you compare it against?
Not the after-repair value — that is the price of a different house, the repaired one. Compare it against your realistic net from a retail sale: likely sale price in current condition, minus commission, minus the repairs a financed buyer's lender would require, minus your carrying costs for however long that takes.
That is the honest comparison, and sometimes it favours listing. If you want a number to put on that comparison, we make offers across the state including for owners who need cash home buyers in San Antonio, and how we calculate a cash offer sets out the arithmetic in full.
House Buyers Texas buys houses; we are not attorneys and this is not legal or tax advice. Texas probate turns on facts specific to your situation, and a probate attorney or CPA is worth the consultation before you commit to a route.