How do cash home buyers in Phoenix calculate an offer?

What is the after-repair value?

The after-repair value is what the house would likely sell for on the open market once it is updated. Buyers estimate it from recent sales of similar houses nearby: similar size, age, lot, and layout, sold in the last few months, in updated condition.

It is not the same as an online estimate. Automated values often miss condition, which is exactly what matters on a house that needs work.

What goes into the repair estimate?

Everything the house needs to sell at that after-repair value. In the Phoenix area the big items are usually the roof, the air conditioning, plumbing in older homes, electrical panels, pools, flooring, kitchens, and baths. A buyer walks the house to price these, which is why a written offer usually follows a walkthrough.

What are holding and resale costs?

While the house is being repaired and resold, someone pays for the money tied up in it, property taxes, insurance, and utilities. When it resells, there are agent commissions and closing costs again. On a typical renovation these can add up to a sizable share of the price.

A worked example

These numbers are only an illustration, not an offer on any house:

• After-repair value: $400,000
• Repairs: $45,000
• Holding and resale costs: $40,000
• Margin for risk and profit: $40,000
• Cash offer: about $275,000

You may hear of the “70% rule,” a shortcut some investors use: 70% of the after-repair value, minus repairs. It is a rough screen, not a price. Ask any buyer, including us, to walk you through the actual numbers.

How do you compare two cash offers?

Compare what you walk away with at closing, not the headline number. Ask who pays the closing costs, how much earnest money goes to the title company, and how long the inspection period is.

When is listing the better choice?

If the house is in good shape and you have a few months, a listing will often net more even after commission. A cash sale makes more sense when the house needs real work, when time matters, or when certainty matters more than the last dollar. What it costs to sell with an agent lays out the listing side.

General information for Arizona homeowners, not legal, tax, or financial advice. Huge Cash Offer is a home buyer, not a law firm, lender, or housing counselor.