Sellers ask us all the time why our cash offer is lower than what Zillow or Realtor.com says their house is worth. The answer is not a secret. We are happy to walk through the line-by-line math.
The formula in plain English
Our cash offer equals the after-repair value (ARV) of the home, minus the cost of repairs we expect to put into it, minus our closing and holding costs, minus the margin we need to make it worth doing. That is it.
Example: a 3-bedroom Cape Cod in Bayside, Queens. Comparable sales on the same block in the last 6 months show a renovated equivalent sells for $1,070,000. The subject property needs a new roof, an updated kitchen, two bathrooms, hardwood refinishing, and exterior painting. A realistic renovation budget is $85,000. Our holding costs (taxes, utilities, insurance) over a 5-month renovation and resale window are $14,000. Closing costs on both ends are $24,000. The margin we need to make the deal worth our time and capital is $80,000. Cash offer: $1,070,000 minus $85,000 minus $14,000 minus $24,000 minus $80,000 = $867,000.
Why this is fair
The seller who takes our offer gets $867,000 in cash, 14 days from now, with no repairs, no agent commission (6% would be another $64,000), no buyer financing risk, no months of showings. A traditional listing for the same property might net $1,005,000 (the $1,070,000 sale minus the $65,000 in commission and closing costs the seller pays) but that comes after 4-6 months of work, plus the $85,000 in pre-list repairs the seller would have to fund. Net to the seller through the traditional path is closer to $920,000 over half a year. We are about $50,000 below that, and we move now.
When the math actually works for the seller
When time has a cost. If the seller is in pre-foreclosure, the auction date is six weeks out, and a traditional sale will not close before then. If the property is inherited, the heirs live out of state, and the estate is paying $4,000 a month in taxes and insurance on a vacant house. If the seller is going through divorce and the agreement requires the house sold by a specific date. In any situation where four months of waiting carries real cost, our offer is competitive.
When it does not work
When the seller has time, no urgency, and a property that is move-in ready or close to it. In those cases the traditional listing path nets more money. We tell sellers that directly when we see it.
If you want to know what our number would be for your house, send the address. We will run the math the same way we ran it for the Bayside example above, and we will show you the work.
For more background: CFPB explanation of as-is home sales.
Where the margin number actually comes from
The $80,000 margin in the Bayside example above is not arbitrary. It covers the cost of the capital we deploy, the renovation oversight, the property management while we carry the asset, the marketing to resell it, and the actual profit we need to keep doing this. Real estate is a thin-margin, high-risk business when done at this scale. Our average deal makes us 6-9% on what we put in, which is about what a decent stock market index returns in a good year, and roughly nothing in a bad one. We have had years where we lost money on individual deals because we mis-estimated the renovation cost or the resale market shifted under us during the hold period. That risk is real, and it is what the margin number is sized to cover on average.
Why we will not negotiate that line
Sellers occasionally come back with “what if you drop your margin to $50,000? Can we make the deal?” The honest answer is yes, sometimes, on a deal where the math is already conservative. More often, no, because we have ten other deals in the pipeline where the margin actually has to absorb the renovation overruns or the resale-market wobble. If we cut margin to chase volume, we go out of business in 18 months. That is not a hypothetical. We have watched competitors do exactly that.
Where this math applies
The example walked through a Bayside Cape Cod, but the same line-by-line math runs on every house we look at. The two variables that change are the after-repair value (which is hyper-local) and the renovation budget (which depends on what the house actually needs). Everything else is the same. We use this approach for cash offers across our service area in Queens, Long Island, Westchester, and Northern NJ.
Some representative neighborhoods we cover: Bayside, Forest Hills, Manhasset, Yonkers, and Park Slope. The math runs the same way regardless of which one your house is in.
Sellers in similar spots also ask us how to sell a house in probate or sell a hoarder house.
We buy across Long Island, Queens, Brooklyn, Westchester and New Jersey, so you can sell your house fast in Kings Point NY, sell a house fast in Lake Success NY, or read about how we buy houses in Manhasset NY.