How cash home buyers calculate an offer
Cash offers can look low until you see the math behind them. Here is how most investors in the Memphis area get to their number, so you can judge an offer on your own terms.
- No repairs or cleaning
- No agent commissions
- You pick the closing date
- No obligation, ever
Step 1: After-repair value (ARV)
The buyer starts with what the house would sell for once it's fixed up, based on recent sales of similar updated homes nearby: same area, similar size, age and bedrooms. In Memphis this can change block by block, so good buyers use comps within about a mile and from the last six to twelve months.
Step 2: Repairs
Next comes the cost to bring the house up to the level of those comps: roof, HVAC, foundation, plumbing and electrical, kitchens and baths, flooring, paint. Older Memphis houses often need several big items at once, and that is usually what moves the offer the most.
Step 3: Holding and resale costs
While the house is being renovated and resold, the buyer pays taxes, insurance, utilities and financing. At resale they pay agent commissions and closing costs. Together these often add up to around 10% of the resale price.
Step 4: The buyer's margin
Investors take on risk: repairs that run over, a slow market, surprises behind the walls. Their margin covers that risk. Many work backward from a target of roughly 65–75% of ARV, minus repairs.
A worked example
This is an example, not data about any real property:
- After-repair value: $180,000
- Repairs: $35,000
- 70% of ARV: $126,000
- Offer: $126,000 − $35,000 = about $91,000, roughly 50% of ARV
That's why a house that needs a lot of work often gets offers in the 50–60% of ARV range, and a house in good shape can get noticeably more.
What to ask any buyer
- Which comps did you use, and what's your ARV?
- What repairs did you price in, and roughly how much?
- Who pays closing costs, and is the offer the amount I'll actually receive?
- Is the offer in writing, and what could change it after the walkthrough?
A serious buyer will walk you through their numbers. If the house doesn't need much work, compare the offer with what a local agent thinks you would net from a listing.
Questions
Why is a cash offer lower than Zillow?
Online estimates assume a house in typical condition sold on the open market with an agent. A cash offer prices in the repairs, holding costs and resale costs, and gives you speed and certainty instead.
Can I negotiate a cash offer?
Yes. If you have recent repair receipts, a newer roof or HVAC, or comps the buyer missed, share them.
Who actually buys my house?
Cotton Row Home Offers doesn't buy houses. We introduce you to one local cash buyer, who decides whether to make an offer and, if you accept, closes with you at a title company. We may be paid by that buyer for the introduction. You never pay us.
Is there any obligation?
No. Getting an offer costs nothing and commits you to nothing.
Will I get a lot of calls?
No. Your details go to one local cash buyer, not a list. Our AI assistant calls you to go over the property, between 10 a.m. and 6:45 p.m. Central, Monday to Saturday. If you miss the call, it tries again later, at most three calls in all. It says it is an AI, and you can tell it to stop calling at any time. In some cases, such as a home or a phone number in Mississippi, a person from our team calls you instead.
Why does an AI assistant call me?
So you get answers fast, usually within minutes of your request. It asks a few questions about the house, may give you a rough idea of what cash buyers pay for similar homes nearby, and, with your OK, passes your answers to the buyer. A buyer who is interested usually follows up within 24 hours. The call is recorded and transcribed, and the assistant never makes an offer.