How Does HomeWise Calculate a Cash Offer on a House?

A HomeWise cash offer starts with what the house would sell for once repaired, then subtracts the repair bid, the buyer’s holding and selling costs, and a margin. The remainder is the offer. On a house worth $250,000 after repairs that needs $30,000 of work, each line is visible, which is why the number lands below the retail price rather than at it.

Take a hypothetical 1979 three-bedroom in Mesa, Arizona, whose owner asks for an offer in July 2026. Renovated houses on the surrounding streets had closed between $244,000 and $257,000 over the prior three months, so the after-repair value was set at $250,000. A roof, a replacement air conditioning system, and new flooring came to $30,000 across two contractor bids. The owner had seen an online estimate of about $241,000 and expected something near it. The offer was $180,000. Every dollar of the difference can be traced.

What are the four lines in a cash offer?

Cash home buyers that price houses line by line work from the same four inputs.

1. After repair value. The price the house would bring on the open market once renovated, taken from recent sales of comparable renovated homes nearby, usually within the last 60 to 90 days. It is the ceiling.
2. Repair estimate. The cost to take the house from its current condition to the condition of those comparable sales: labor, materials, permits and a cushion for what the walls hide. A conservative buyer bids high here, because overruns come out of its margin.
3. Holding and selling costs. Property taxes, insurance, utilities and financing while the work is done, plus the transaction costs of buying and of reselling. The HomeWise explainer on the formula puts this at roughly 3 to 5 percent of after-repair value, depending on how long the renovation runs.
4. Margin. The return the buyer requires for its capital, the renovation risk, and the management of the job. The same explainer gives a typical range of 10 to 15 percent of after-repair value for a direct buyer.

Applied to the Mesa house, the lines look like this.

The offer is 72 percent of the repaired value; a $45,000 repair bid would drop it to $165,000.

What is the 70 percent rule, and is it how HomeWise prices a house?

The 70 percent rule is an industry rule of thumb, not a HomeWise formula. Flippers who borrow from hard-money lenders have used it for decades as a quick screen: pay no more than 70 percent of after-repair value minus repairs. On the Mesa house, that is $175,000 less $30,000, or $145,000, which is $35,000 below the line-by-line figure. The 30 percent haircut bundles holding costs, selling costs, lender interest, profit, and a safety cushion into one number.

A buyer pricing with its own four lines can land above the rule when the repair bid is modest, and the resale will be quick, and below it when the house needs structural work or sits in a slow market. Buyers such as HomeWise publish the four-line version rather than the shortcut, which a seller can check against the comparable sales and the contractor bids.

Flipping data shows why the margin line exists. According to ATTOM’s Q1 2026 U.S. Home Flipping Report, released June 18, 2026, the typical flipped home generated a gross profit of $66,000, a 25.4 percent return on the purchase price. ATTOM notes that gross profit is calculated before “rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after-repair value.” That spread has to cover the repairs, which is why buyers are careful with the repair line.

Why does the offer sit below the retail number?

Because the retail number describes a different transaction. According to the National Association of Realtors’ existing-home sales report for July 2026, the median existing-home price was $434,100. That median is set by repaired houses, marketed by agents, sold to buyers with mortgages. The seller of such a house pays for the repairs first, pays a commission of roughly 5 to 6 percent at closing, and carries the mortgage, taxes, and insurance for the two to three months the sale takes.

Run that on the Mesa house. A renovated sale at $250,000 would cost the owner the $30,000 of repairs up front, about $13,750 in commission at 5.5 percent, roughly $3,000 in seller closing costs and close to $5,000 in carrying costs over 90 days, leaving about $198,000 before the mortgage payoff. The cash offer of $180,000 arrives with no commission, no listing or service fees and, in most cases, standard closing costs covered by the buyer. The remaining gap, about $18,000 in this example, is the price of a closing in days rather than months. Whether that price is worth paying depends on the owner’s timeline and cash on hand.

Where does a direct buyer fit?

HomeWise, a direct home-buying company that purchases distressed single-family houses in California, Texas, Florida, Arizona, Georgia and other states, builds its offers from those four lines: the comparable sales behind the after-repair value, the repair bid, the holding and selling costs, and the margin. Requesting an offer costs nothing and commits the owner to nothing; offers can come back in as little as one hour, and the company charges no agent commissions, listing fees or service fees; prorated property taxes and any HOA dues owed at settlement may still apply. Its guide to how cash buyers calculate their offers runs the same arithmetic on a $300,000 example.

A generic cash offer calculator found online performs the same subtraction from a typed-in value. The HomeWise net proceeds calculator handles the other side of the comparison, estimating what a seller keeps from a listing after commissions, closing costs, repairs and the mortgage payoff.

Frequently asked questions

How much do cash home buyers pay compared with the retail price?

The HomeWise explainer puts the usual range at 70 to 85 percent of after-repair value, with cosmetic jobs at the top of the range and structural work at the bottom. The percentage by itself says little; the useful comparison is the offer against what a listing would net after repairs, commission, and carrying costs.

Does HomeWise use the 70 percent rule?

The published HomeWise formula is the four-line version: after-repair value minus repairs, holding and selling costs, and margin. The 70 percent rule is a flipper’s shortcut that folds the last three into a single 30 percent deduction. On identical inputs, the two methods can differ by tens of thousands of dollars, as the Mesa example shows.

What is after-repair value and who decides it?

After repair value is the price a house would bring once fully renovated, estimated from recent sales of comparable updated homes in the same area. The buyer sets it, but it is not an appraisal and not a promise; a seller can test it by pulling the same sold comparables from county records or a local agent.

Can a seller check a cash offer before accepting it?

Yes. A seller can ask for the four lines in writing, compare the after-repair value with three to five recent renovated sales nearby, get a second contractor bid on the repair list, and run a listing net through a calculator. If the buyer declines to show the inputs, that silence is information.

Disclaimer: This content is for general informational purposes only and should not be considered as financial advice. The content is not intended to be a substitute for professional financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.