How Much Do Cash Buyers Actually Offer for a House?

A number arrived and it felt insulting. Before deciding whether to be annoyed, it helps to know that the figure was almost certainly never about your house. It came out of a formula, and once you can see the formula you can work out exactly what you would be giving up.

The arithmetic behind the number

A retail buyer prices forwards: what is this worth, what will I pay. An investor prices backwards, starting from what the property will be worth once it is fixed and subtracting everything between here and there.

Roughly: after-repair value, minus repairs, minus holding and selling costs, minus the margin that makes it worth doing. If a wholesaler is involved, subtract their assignment fee too, because they intend to sell your contract to the investor rather than buy it themselves. Every one of those deductions happens before a number reaches you.

In practice that lands most unsolicited offers between 50 and 70 percent of market value. Wholesalers sit at the bottom of that range, because they need room for two parties to profit. A buy-and-hold investor can go higher, since there is only one.

What you are actually being sold

The gap is the price of certainty. No listing, no showings, no financing contingency, no repairs, and a close in a fortnight rather than a season. For an inherited property two states away, a house that needs more work than you want to manage, or a deadline you cannot move, that can be worth a great deal.

It is worth much less if you have time. The mistake is not selling at a discount. It is selling at a discount without knowing the size of it.

Finding out what the gap is

You do not need an appraisal to get close. Pull recent sold prices for similar properties near you, not asking prices, which are wishes. Ask a local agent for a broker price opinion, which most will give free. If the property needs work, get one contractor estimate so you are subtracting a real repair figure rather than the buyer's.

Then compare. An offer at 65 percent of a realistic market value on a house needing genuine work is a defensible trade. The same percentage on a property in good condition is you paying a large sum for speed you may not need.

Low is not the same as fraudulent

A lowball offer is a bid, and you can decline a bid. What separates an aggressive buyer from a scam is not the number but the ask: a request for money from you, for your Social Security number, or for a signature on something you have not read. If you want to check a specific sender before engaging, see whether a cash offer is real for the verification steps, and how to tell a real buyer from a wholesaler for working out who you are actually talking to.

And if the offers keep coming whether or not you answer, that is a list problem rather than a buyer problem. How a wholesaler got your phone number covers where the list came from.