The formula, with a worked example
Most cash buyers price from the same starting point. Take the after-repair value, take 30% off it, then subtract the repairs.
$260,000 − 30% − $45,000 = $137,000
The 30% isn't margin. It covers the renovation risk, four to six months of carrying costs while the work happens, the agent commission and closing costs when the buyer eventually resells, and profit. Strip out the profit and most of that 30% is still spent.
Why the headline gap misleads people
The instinct is to compare $137,000 against $260,000 and conclude you're losing $123,000. That comparison isn't available to you, because $260,000 is what the house sells for after someone spends $45,000 fixing it.
The honest comparison is against what a listing would actually put in your pocket:
- The repairs, funded by you. $45,000 you'd have to have.
- Agent commission. Negotiable since 2024, but budget 5–6%.
- Seller closing costs. Roughly 1–2%.
- Carrying costs. Mortgage, taxes and insurance for however long it takes.
- Concessions. What the buyer's inspector finds and asks for.
Run that and the real gap is usually far smaller than $123,000. On a house needing serious work it can close to almost nothing — and occasionally the cash offer wins outright, because a house that fails a lender's appraisal can't be sold the conventional way at all.
When the gap is genuinely large
If your house is move-in ready and you can wait, the gap is real and it's wide. List it. We say this on our should I sell for cash page too, because it's the honest answer for that seller.
What makes an offer higher or lower
Condition is most of it. After that: how confident anyone can be about the after-repair value in your specific neighbourhood, whether the house is occupied, whether title is clean, and whether anything is filed against the property. Uncertainty always gets priced.