How Cash Home Buyers Calculate Offers in the DMV: The Math Behind Every Number
If you have ever gotten an offer from a cash home buyer and wondered “how did they come up with that number?” — this article explains everything. At Old Fashioned Home Buyers, we believe every seller deserves to see the math. No mystery, no games. Here is exactly how we (and most legitimate cash buyers) calculate offers in the DC, Maryland, and Virginia market.
The 70% Rule: The Industry Standard Formula
The formula most cash buyers use is called the 70% rule:
Maximum Offer = (ARV × 70%) − Repair Costs
Let us break down each part:
ARV (After-Repair Value)
ARV is what your house would sell for on the open market after all repairs and renovations are completed. This is not what the house is worth today in its current condition — it is what it would be worth in move-in-ready condition.
How we determine ARV:
- We pull comparable sales (comps) from the MLS — homes similar in size, age, and location that sold in the last 3-6 months
- We adjust for differences: square footage, lot size, number of bedrooms/bathrooms, garage, basement finish, and condition
- We focus on comps in your specific market. A 3-bed ranch in Bowie sells very differently than one in Bethesda.
- We use at least 3 comps and typically look at 5-7 to establish a reliable range
The 70% Multiplier
Why 70%? That 30% margin covers:
- Holding costs: Mortgage payments, taxes, insurance, and utilities while the property is being renovated (typically 3-6 months)
- Selling costs: Agent commissions (5-6%), closing costs (1-3%), title insurance, and transfer taxes when the renovated house is sold
- Profit margin: The investor’s profit for taking on the risk, managing the renovation, and providing the capital
Some investors use 65% in expensive markets or for heavy-renovation projects. Some use 75% for light cosmetic flips. At Old Fashioned Home Buyers, we typically use 70% — and we show you the exact percentage we are using so there are no surprises.
Repair Costs
We estimate repairs based on a visual walkthrough of the property. Common items we assess:
- Roof: $8,000-$15,000 for a full replacement in the DMV
- HVAC system: $5,000-$12,000 depending on system type and size
- Kitchen renovation: $15,000-$35,000 depending on scope
- Bathroom renovation: $5,000-$15,000 per bathroom
- Flooring: $3,000-$8,000 for a typical 1,500 sq ft home
- Foundation/structural: $5,000-$30,000+ depending on severity
- Paint (interior + exterior): $3,000-$7,000
- Electrical/plumbing updates: $2,000-$10,000
We do not inflate repair estimates to justify a lower offer. Every number we use is based on actual contractor pricing in the DMV market.
A Real-World Example
Let us walk through a real scenario using a house in Silver Spring, Maryland:
- The property: 3-bed, 2-bath split-level, built in 1972, 1,400 sq ft, needs updating throughout
- Comparable sales: Three similar renovated homes sold recently for $415K, $425K, and $440K
- Our ARV estimate: $425,000 (conservative — we use the middle of the range, not the top)
Now the repair estimate:
- Kitchen renovation: $22,000
- Both bathrooms: $14,000
- New flooring throughout: $6,000
- Interior/exterior paint: $5,500
- HVAC replacement: $8,000
- Miscellaneous (fixtures, electrical, landscaping): $4,500
- Total repairs: $60,000
$425,000 × 70% = $297,500 − $60,000 = $237,500 offer
How Does This Compare to Listing with an Agent?
Using the same Silver Spring house, let us compare:
Option A: Sell as-is with an agent
- Likely list price (as-is): $310,000-$330,000
- Minus 6% commission: -$19,200
- Minus closing costs (2%): -$6,400
- Minus buyer’s repair credit (typical negotiation): -$15,000
- Time on market: 45-90 days
- Net to seller: ~$279,000-$289,000 (after 2-3 months)
Option B: Sell to Old Fashioned Home Buyers for cash
- Cash offer: $237,500
- Commission: $0
- Closing costs: $0 (we pay them)
- Repairs: $0
- Time to close: 7-14 days
- Net to seller: $237,500 (in under 2 weeks)
The difference is roughly $42,000-$52,000. That is real money. But here is what the numbers do not capture:
- 2-3 months of mortgage payments you avoid ($4,000-$6,000)
- No risk of the buyer’s financing falling through
- No showings, no staging, no strangers walking through your home
- No post-inspection renegotiation (which can knock off another $10K-$20K)
- Certainty — you know exactly what you are getting and when
For some sellers, the extra $42K is worth the wait and hassle. For others — especially those facing foreclosure, managing difficult tenants, going through divorce, or living out of state — the speed, certainty, and simplicity of a cash sale is worth far more than the price difference.
Red Flags: How to Spot a Bad Cash Offer
Not all cash buyers are honest. Here are warning signs:
- They will not show you the math. If a buyer cannot explain how they arrived at their number, walk away.
- They pressure you to sign immediately. A legitimate offer comes with time to think — no expiration date tricks.
- They ask for money upfront. You should never pay a cash buyer anything. Period.
- They use “bait and switch” — high initial offer that gets reduced at closing.
- No local presence. Out-of-state buyers who have never seen your neighborhood cannot properly value your home.
Why We Show Every Number
At Old Fashioned Home Buyers, Mourad walks every seller through the full calculation — the comps, the repair estimates, the percentage, and the final number. You can agree, disagree, or get a second opinion. Our job is to make you a fair offer and give you the information to make the best decision for your family. That is it.
See What Your DMV Property Is Worth →
Call (240) 200-0897 — Mourad will show you the math on your property.