What do cash home buyers actually pay? The math, opened up
Every "we buy houses" company works from the same basic formula. Here it is, with real Tulsa numbers, so you can check any offer you receive, including ours.
The formula behind nearly every legitimate cash offer is simple:
Offer = After-Repair Value − Repair Costs − Buyer’s Costs − Margin
The difference between a fair buyer and a predatory one isn’t the formula, it’s whether they’ll show you the inputs. Let’s take them one at a time.
After-repair value (ARV)
What your house would sell for fully renovated, based on closed sales of similar renovated homes within about a mile, in the last six months. Not Zillow’s estimate, not the tax assessment, not asking prices. In Tulsa, ARV varies block by block, a renovated 3/2 might close at $155,000 near 21st & Garnett and $290,000 in Florence Park, which is why local buyers price more accurately (and often higher) than national algorithms.
Repair costs
The renovation budget to get from your house’s current condition to that ARV, at contractor rates. Typical Tulsa figures: a cosmetic refresh (paint, flooring, fixtures) runs $15–30 per square foot; kitchens $10,000–25,000; a roof $8,000–15,000; foundation work on our expansive clay $5,000–20,000+; full gut renovations $50+ per square foot. A fair buyer itemizes this line and hands it to you.
Buyer’s costs
The costs a buyer absorbs that a homeowner rarely thinks about: property taxes, insurance, and utilities during a 3–6 month renovation; financing costs if they borrow; and the eventual resale costs, commissions and closing costs, when they sell the finished house. Together these typically run 8–12% of ARV.
Margin
Yes, cash buyers make a profit, typically a target of 10–15% of ARV per project, in exchange for taking on the renovation risk (surprise sewer lines, market shifts, contractor overruns). A company claiming to charge "no profit" is either lying or hiding it in an inflated repair estimate. Ask to see the margin. Fair buyers will tell you; the other kind get offended.
A worked example
A 1,400 sq ft house near TU. Renovated comps close around $175,000. It needs flooring, paint, a kitchen, and a roof: $38,000. Holding and resale costs: $17,500 (10%). Margin: $21,000 (12%).
$175,000 − $38,000 − $17,500 − $21,000 = $98,500 offer.
Compare that to listing as-is around $115,000: minus ~$7,000 commission, ~$4,000 concessions after inspection, ~$2,000 closing, and 3–4 months of holding costs, the nets land closer than the sticker prices suggest.
Red flags in any cash offer
- No math shown. A number with no basis is a number designed to move later.
- The re-trade. A high offer that drops sharply days before closing "after inspection." Legitimate buyers inspect before the contract, not after.
- Pressure to sign tonight. Real offers survive a week of thinking.
- No title company. Every legitimate closing in Oklahoma runs through a licensed title company or attorney. No exceptions.
- Fees charged to you. The buyer pays the costs. If a "buyer" asks you for money at any point, walk away.
Get two or three offers, ask each buyer to show their inputs, and compare against an agent’s net sheet. Ten minutes of arithmetic protects tens of thousands of dollars.
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