Money And Numbers
How Cash Buyers Actually Calculate An Offer
There is no secret formula and no algorithm doing something clever. It is four numbers and a subtraction, and any buyer should be willing to show you theirs.
Sellers often assume a cash offer is arbitrary, or that it comes from some proprietary model. It does not. Almost every cash buyer in the country works from the same four inputs, and once you can see them you can judge whether a number is reasonable rather than just whether it feels low.
The Four Inputs
1. What The House Is Worth Finished
The starting point is what comparable houses nearby have actually sold for, in the condition a retail buyer expects. Sold prices, not asking prices, and genuinely comparable: similar size, similar age, similar street. In a city like San Antonio where a house inside Loop 410 and one past 1604 are barely the same product, this matters more than it sounds.
2. What The Work Costs
Then the cost of getting it to that condition. Roof, foundation, plumbing, electrical, HVAC, kitchen, bathrooms, flooring, paint, and clearing the property if it is full. This is the number that varies most between buyers, because it depends on their actual contractor costs and on how thoroughly they looked.
3. The Cost Of Holding And Reselling
While the work happens, somebody pays taxes, insurance, utilities and the cost of the money. Then selling it afterwards costs commission and closing costs. These are real and they are frequently left out of a seller's mental model, which is why the offer looks harsher than expected.
4. Margin
The buyer is a business taking on the repair risk, the market risk and the timeline. There is a margin. A buyer who pretends otherwise is either not being straight or is not going to complete.
A Worked Example
These Figures Are Illustrative Only
The round numbers below exist to show the shape of the arithmetic. They are not San Antonio market data, not a valuation, and not an indication of what your house is worth. Your own numbers will be different in every line.
| Line | Illustrative figure |
|---|---|
| Finished value of comparable sold houses | $300,000 |
| Less: repairs and clearing | -$60,000 |
| Less: holding costs during the work | -$9,000 |
| Less: cost of reselling it afterwards | -$21,000 |
| Less: buyer margin | -$30,000 |
| Indicative cash offer | $180,000 |
The point of laying it out is that each line is arguable. If you think the repair estimate is too high, say so and ask what it is based on. If you have a contractor quote that is lower, that is a real input. A buyer working honestly will engage with that; one who will not show you the lines has nothing for you to check.
Why This Is Not Comparable To A Listing Price
The most common mistake is comparing a cash offer against what an agent says the house could list for. Those are not the same kind of number. A listing price is a gross figure before commission, before buyer concessions, before the repairs a lender will require, and before several months of carrying costs. A cash offer is a net figure with a date attached.
To compare them properly, take the agent's realistic sale price and subtract commission, the repairs needed to pass a lender's standards, likely concessions, and the cost of holding the house for however long it takes. Then compare that to the cash number. It is often still higher, and sometimes it is not. There is a fuller breakdown in what it actually costs to sell a house in Texas.
What Makes An Offer Higher Or Lower
- Condition, by a long way. The repair line is the biggest variable.
- How accurately you describe it. Surprises make buyers cautious, and cautious buyers pad their estimates.
- Whether it can be financed. A house a lender will not touch has a much smaller buyer pool, which affects the finished value assumption.
- Title complications. An unadministered estate or an unreleased lien adds time and cost.
- Occupancy. A tenanted house is priced as an occupied asset.
Ask For The Lines
When we send an offer we show the finished-value figure and the repair estimate it is built on, so you can argue with either. If you get an offer from anyone that is a single number with no workings, asking for the breakdown is a completely reasonable request.
Questions
Related Questions
Why is the cash offer so much lower than my neighbor's sale price?
Your neighbor's sale price was probably a finished house sold at retail with a commission deducted afterwards. A cash offer subtracts the repair cost, the holding cost, the resale cost and a margin from that kind of figure. Those deductions are the whole difference.
Can I negotiate a cash offer?
Usually, and the productive way is on the inputs rather than the total. If you have a contractor quote lower than their repair estimate, or comparable sales they missed, that is a real argument. "Can you do better" without new information rarely moves anything.
Do cash buyers use appraisals?
Not usually, because they are not borrowing. That is precisely why a cash purchase can complete on houses that fail an appraisal or that a lender will not accept as security.
What is a fair margin for a cash buyer?
There is no single right answer, and it varies with risk, how much work the house needs and how long the money is tied up. What matters more is whether the whole calculation is visible to you, so you can weigh it against listing.
