A cash-offer investor typically pays 70 to 85 percent of what your home would sell for on the open market after repairs, less the repair cost: the flipper's version is the 70 percent rule, and the large instant-offer companies land higher, around 90 percent, but add a service fee of five to seven percent that brings the net back to the same range.
Every 'we buy houses' offer is the same arithmetic dressed differently: the finished value of the home, minus what it costs to get it there, minus the investor's margin and holding costs. Knowing the arithmetic tells you what the offer should be before it arrives, and what you are paying for the speed.
The formula
A flipper starts from the after-repair value (ARV), what the home would sell for fixed up, from recent comparable sales. They multiply by 70 percent, sometimes 75 in a strong market, and subtract the repair budget. A home worth $400,000 renovated, needing $40,000 of work, gets an offer around $240,000. The missing 30 percent covers their buying and selling costs, financing while they hold it, the risk of what the walls hide, and the profit.
The instant-offer companies (the iBuyers) buy homes that need little work and price closer to market, then charge a fee of five to seven percent and deduct repairs after their inspection. On a home in good condition the net is often 88 to 92 percent of market; on one that needs work it converges on the flipper's figure.
What you are buying with the discount
Certainty and speed. A cash investor closes in one to three weeks, does not need an appraisal, does not have a loan that can fall through, and takes the home as-is. Against that, a listed sale costs eight to ten percent in commissions and costs and takes two to three months, so the true gap between an investor offer and the open market is not 30 percent but the difference between the investor's discount and the listing's costs, usually 10 to 20 percent of the price.
That gap is worth paying for some sellers: an inherited home in another state, a foreclosure with a sale date, a divorce, a home that will not pass a lender's appraisal. It is expensive for a seller who can wait sixty days.
How to check an offer
Get the investor's ARV and repair estimate in writing and check both: pull the comparable sales yourself and get a contractor's number for the repairs. Get two or three offers; they vary more than people expect. Read the contract for an inspection period and an assignment clause, since wholesalers sign contracts they intend to sell to another investor and walk away if they cannot. And price the alternative: our score report estimates what your home would net listed, from what nearby homes actually closed at.
Questions people ask
Do investors pay full price for houses?
Rarely. An investor needs a margin between the purchase price and the resale or rental value, so an offer at full market value usually means the market value has been estimated low, or the contract has terms that recover the difference later.
Are we-buy-houses companies legitimate?
Most are legitimate businesses making low offers, which is legal. The risks are wholesalers who cannot actually close, contracts with long inspection periods that tie the home up, and repair deductions after signing. Check the buyer can show proof of funds and read the exit clauses.
Is it better to sell to an investor or list?
List, if you can wait two to three months and the home will appraise: the net is higher by 10 to 20 percent in most cases. Sell to an investor when time or condition rules a listing out, and get several offers.