What Cash Home Buyers Actually Pay: The Formula, Explained Honestly

If you’ve spent any time researching cash home buyers in Texas, you’ve probably run into the “70% rule,” the idea that cash buyers pay 70% of a home’s after repair value, minus the cost of repairs. It gets repeated so often online that it sounds like a law of physics. It isn’t. It’s a rough shortcut, and treating it as gospel is exactly why so many sellers feel like they’re being lowballed or lied to. We think you deserve better than a shortcut. This page walks through how a fair cash offer is actually built, piece by piece, so you can judge any offer, ours or anyone else’s, on its real merits rather than a slogan.

Why a Flat Percentage Doesn’t Tell the Whole Story

The 70% rule got popular because it’s easy to say out loud. The problem is that it collapses five or six genuinely different variables, each of which changes from house to house, into one made-up number. A house that needs a new roof and foundation work behaves nothing like a house that just needs paint and carpet, even if they’d sell for the same price once fixed up. A buyer who can flip a property in two months has completely different costs than one who’s stuck holding it for eight. When you flatten all of that into “70%,” you’re not getting an honest estimate, you’re getting a number that happened to work for some other house, on some other seller’s timeline, in some other neighborhood. Real cash offers, done properly, are built from the ground up for the specific property in front of us. Sometimes that math lands above 70% of value. Sometimes it lands below. The only way to know is to actually run it.

Step One: What the House Would Be Worth Fully Fixed (ARV)

Every honest cash offer starts with the After Repair Value, or ARV: what the house would sell for on the open market to a typical retail buyer once it’s fully renovated. This isn’t a guess and it shouldn’t be treated like one. We build it from real, recent comparable sales, homes similar in size, condition, layout, and location that have actually closed nearby, adjusted for the differences between those homes and yours. If the comps don’t support a number, the number doesn’t get used. This is the anchor for everything that follows, so it has to be right before anything else can be.

Step Two: What It Actually Costs to Get There

Once we know what the house is worth fixed up, the next question is what it costs to get it there. This is where the 70% rule falls apart the fastest, because repair costs vary enormously from one house to the next. Roofing, HVAC, flooring, paint, kitchen and bathroom updates, electrical, plumbing, foundation issues, they all add up differently depending on the specific condition of the specific house. A property that needs $15,000 of cosmetic work and one that needs $70,000 of structural and mechanical work cannot fairly use the same formula, even if they’d both be worth the same amount fixed up. We walk the property and price out what it would genuinely take to bring it to the condition that supports the ARV we calculated, not a generic percentage guess.

Step Three: The Cost of Time (Holding Costs)

Buying a house for cash doesn’t mean the money stops moving once the deal closes. From the day we take ownership until the day it resells, we’re carrying real costs, property taxes, insurance, utilities, and interest if financing is involved. Those costs run every month the renovation and resale process takes, and that timeline itself depends on the scope of repairs and how the market is moving. A light rehab that takes six weeks costs a lot less to carry than a major renovation that takes six months. This is a real, calculable cost, not padding, and it belongs in the math openly.

Step Four: The Cost of Selling It Again

Eventually the renovated house has to sell to a retail buyer, and that sale comes with its own costs: real estate agent commissions, closing costs, staging, and marketing. These are standard costs of doing business in real estate, and they reduce what actually reaches the buyer’s pocket even after a successful resale at full ARV. Any honest offer accounts for these upfront rather than pretending the ARV number is what ends up in the buyer’s hands.

Step Five: A Fair Margin for Risk

Here’s the part a lot of cash buyer marketing tries to hide: after covering repairs, holding costs, and resale costs, a cash buyer needs a margin for risk and profit, or the business doesn’t survive to make the next offer. This isn’t something to apologize for. Repair budgets run over. Markets shift during a renovation. Contractors find problems behind walls that nobody could see at the walkthrough. Foundations settle, roofs leak, permits get delayed. That risk is real, and a business that doesn’t price it in eventually can’t make offers to anyone. We’d rather name this margin plainly than bury it inside a vague, unexplained gap between your house’s value and the number on the offer sheet.

Putting It Together

When you line all of this up, the formula is straightforward: ARV, minus repair costs, minus holding costs, minus resale costs, minus a reasonable margin for risk and profit, equals the offer. No mystery, no hidden multiplier. What changes from house to house isn’t the formula, it’s the inputs. A property with light cosmetic repairs and a fast resale timeline will land at a very different point on the spectrum than a property with major structural issues in a slower-moving pocket of the market. That’s exactly why the “70% rule” is often wrong for any specific house. It’s an average smeared across thousands of different situations, applied to yours as if it were custom-built. It wasn’t.

The Trustworthy Version Is the Actual Math

We don’t think a percentage on a website means much on its own. What means something is showing you the real comps we used, the real repair estimate for your specific house, and the real costs that go into the number we’re offering. That’s what separates an honest offer from a recited formula. If you’d like, we’re glad to walk through the actual math for your property line by line, the ARV, the repair scope, the holding period, the resale costs, and the margin, so you can see exactly how we got to the number, not just what the number is. Reach out to Lone Star Home Offers whenever you’re ready, and we’ll build that math with you, for your house, not a generic one.

See also: real objections to selling for cash, and honest answers to each.

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