How Much Do Cash Buyers Pay? The Real Formula (2026)

The 70% rule (and why it's a starting point, not an answer)

The starting point most California cash buyers use is some version of the 70% rule:

Maximum cash offer = (After-Repair Value × 0.70) − Repair Costs

The 70% is the cash buyer's gross margin. It has to cover:

• Renovation cost overruns (real renovations almost always go over budget)
• Holding costs during renovation (3-6 months of mortgage, taxes, insurance, utilities)
• Selling costs when the cash buyer eventually sells the renovated home (commission, closing costs)
• The cash buyer's profit

Different cash buyers use different multipliers:

• Conservative buyers: 65-70% (lower offers, higher deal certainty)
• Aggressive buyers: 75-85% (higher offers, sometimes back out at closing)
• Institutional iBuyers (Opendoor, Offerpad pre-2023): used to do 90%+ but most have pulled back significantly

The right multiplier depends on the buyer's renovation costs (which vary by team and market) and risk tolerance.

After-Repair Value (ARV)

ARV is the sale price the cash buyer expects to get after renovating and reselling.

Determining ARV involves:

1. Pulling recent comparable sales (last 3-6 months)
2. Adjusting for size, condition, lot, location
3. Estimating the post-renovation condition
4. Estimating market timing for the eventual resale

A reputable buyer will share their ARV estimate and the comps they used. If a buyer won't show you their math, that's a red flag.

ARV vs. Zillow estimate: Zillow's algorithm is OK for general orientation, often within 5-15% of actual value. It struggles with:

• Recently remodeled homes (Zillow can underestimate)
• Heavily customized homes (over- or underestimate)
• Homes in unique submarkets
• Tear-down or rebuild candidates

For an honest ARV, you want a real estate agent's CMA (free) or pay for an appraisal ($500-$700).

Repair costs

Repair estimates by a cash buyer should include:

• All cosmetic updates needed for the post-renovation finish quality
• Mechanical systems (HVAC, electrical, plumbing) requiring updates
• Structural issues (foundation, roof, framing)
• Flooring throughout
• Kitchen and bath updates if needed
• Landscaping
• Permits and inspection costs

Real renovation budgets for Sacramento single-family homes (2026 numbers):

• Light cosmetic refresh (paint, flooring, fixtures): $20,000-$35,000
• Mid-level renovation (kitchen, bath, paint, floors): $50,000-$90,000
• Heavy renovation (everything plus systems): $100,000-$180,000
• Gut renovation (down to studs): $200,000-$400,000+

If a cash buyer's repair estimate is dramatically lower than these ranges for similar scope, either they don't actually plan to renovate to top market quality, or they're going to come back with a price reduction at closing.

Worked example

You own a 1985 Elk Grove ranch home, 1,800 sq ft, 4 bed 2 bath, in livable but dated condition. You're considering selling to a cash buyer.

Step 1: Cash buyer estimates ARV at $580,000 based on three comparable Elk Grove sales of similar updated homes in the last 90 days.

Step 2: Cash buyer's renovation team estimates $55,000 in updates (full kitchen and bath remodel, paint throughout, flooring, exterior touch-up, landscaping).

Step 3: Apply formula at 75% (a reasonable Sacramento middle-of-the-road number):

($580,000 × 0.75) − $55,000 = $435,000 − $55,000 = $380,000 offer

If the cash buyer goes more aggressive at 80%:

($580,000 × 0.80) − $55,000 = $464,000 − $55,000 = $409,000 offer

Range of reasonable offers: $380,000 to $409,000.

If you got an offer in this range, the math is realistic. If you got $350,000, the buyer is being conservative or expects significant cost overruns. If you got $440,000, either your ARV is higher than estimated, or the buyer is going to revise the offer down at inspection.

How to verify if an offer is fair

If you get a cash offer and want to sanity-check it:

1. Get an honest ARV. Ask a local listing agent for a CMA based on the assumption your house is fully renovated. Free, takes a day. This is the most important number — if your ARV estimate is off by 10%, your offer expectation is off by 10%.
2. Get a renovation estimate. Hire a contractor to walk through the house and price out what would be needed to bring it to top of market condition. Costs about $300-$500 for a thorough estimate.
3. Apply the formula. ARV × 0.70 to 0.85, minus repairs.
4. Compare offers. Get 2-3 cash offers if you can. The variance tells you something. If they're tightly clustered, the market is honest. If one is dramatically higher, treat it with skepticism — bait-and-switch is real.

Red flags

Offer is dramatically higher than the others. Some buyers offer high to win the contract, then renegotiate down at closing using inspection findings. Always read the contract for "as-is, no contingencies" language. If the contract has lots of contingencies, the high offer doesn't matter.

Buyer won't show their math. If they say "fair market value" without specifics, they're hiding something. ARV and repair estimates should be transparent.

Buyer asks for non-refundable deposit. Standard cash sales might have a small earnest money deposit ($1,000-$5,000) held in escrow, refundable per contract terms. Non-refundable deposit demands are unusual and usually a red flag.

Buyer's "license number" doesn't check out. California real estate brokers and agents are searchable on the DRE website. If a "buyer" claims to be a licensed party and isn't, walk away.

Pressure tactics. "Sign by tomorrow or the offer expires" is a sales technique. Reputable buyers will hold offers for 7-30 days while you decide.

When you should expect a higher offer

Your offer will trend toward the high end of the range if:

• Your house is in good condition (lower repair estimate)
• Your house is in a desirable submarket (higher ARV)
• The market is competitive (multiple cash buyers bidding)
• Your house is below median price for the area (more buyer pool)

Your offer will trend toward the low end if:

• Your house needs significant work
• Your house is in a softer submarket
• The local market is uncertain (cash buyers protect against drops)
• Your house is unusually large or unusual for the area
• Title issues, easements, or other complications exist

Bottom line

Cash buyers are not charities and they don't pay retail. Reputable cash buyers also aren't scammers — they apply a formula based on after-repair value, real renovation costs, and a margin that covers their work and risk.

A fair cash offer in Sacramento or the Bay Area in 2026 is typically 70-85% of after-repair value, minus repair costs. If an offer falls in that range and the buyer can show their math, it's honest. Whether it's the right offer for you depends on your alternatives — listing with a realtor, holding the property, doing the renovation yourself.

If you want to see our specific math on your house — the comps we'd use for ARV and the renovation budget we'd estimate — fill out our form. The offer is free, transparent, and good for 30 days while you compare.