How It Works

We are well aware of the question that has been plaguing you since the start; “How much will I get for my house?” If you have made it all the way here, you will want to know the answer right away. However, there are a few steps involved and once you understand these steps, you will get your answer. So let us look at a proper breakdown of how much we can pay for your house.

Our Home Buying Formula

Firstly, we use a formula to simplify things. Our formula uses four factors and we’ll cover each part. But, first let us look at the formula itself:

ARV – REPAIRS – TRANSACTION COST – MINIMUM PROFIT = YOUR CASH OFFER

ARV

To explain further, ARV is the After Repair Value. This is the value of your home if there is no deferred maintenance and no repairs needed. It is the retail value of your house if the condition is move-in ready and shows well to prospective buyers.

REPAIRS

The repairs that a home requires to fetch ARV are subjective at best. The scope of work is not always easy to discover either. Sometimes, when changing flooring, foundation issues are discovered. When we remodel a bathroom, we may find plumbing issues. We work hard to inspect a home before we buy it, in order to mitigate our risk and to give a better offer. The more confident we are on the repairs, the more we can offer. Worst case scenario, we have to add some ‘maybes’ into our offer, so we can plan some extra work ‘to be discovered’.

TRANSACTION COSTS

There are many transaction costs, but they can be grouped into major categories. We have loan costs, which are paid to our lender. This would be 2-5% of our total costs on each rehab. The loan costs include loan origination fees and monthly loan payments, which are interest only. Realtor fees usually average 5%, of which half of that goes to the buyers agent. When everything is added up, transactions costs are estimated at 15% of our total cost.

MINIMUM PROFIT

Naturally, we have to make money to continue our marketing and support our families. Our profit on our flips can range, but we always hope for 15% profit. This gives us some price protection as well. If we go over budget and still make 10%, we are ok. One major surprise can wipe out half of our profit, so we have to be cautious. We can’t always get an accurate repair estimate, especially in hoarder situations. We always use conservative numbers, but our profit estimate of 15% alleviates the stress of not knowing everything when we buy.

YOUR CASH OFFER

Once we add up our transaction costs and combine that with our minimum profit, we get about 30% between those two. So, an easy simplification of our formula is ARV – 30% – Repairs = Your Cash. Our offers are always firm and never have anything hidden in them. What we offer you is what you get. We pay for everything and you get a check for that full amount. This is the appeal of selling for cash.