The first question almost every seller asks me, the second they hear a number, is some version of: “Okay — how’d you get that?” It’s the right question. A cash offer can feel like it came out of a black box, and most homeowners have never had a reason to learn the one piece of jargon the whole thing rests on: ARV.
So here’s the entire formula, no black box. I run acquisitions at Diamond — I’m the person who evaluates the property and puts the offer together — and this is the same math I’d walk you through sitting at your kitchen table.
The one formula behind every cash offer
Every legitimate cash offer in Texas comes from the same equation:
Cash offer = After-Repair Value (ARV) × 75–80% − estimated repairs
That’s it. Three numbers: what the house is worth fully fixed up, a percentage, and the cost of the repairs. Get those three right and you have the offer. The rest of this post is just explaining each piece honestly — because the number only feels fair once you can see where it comes from.
What “ARV” actually means
ARV stands for after-repair value — what your house would sell for on the open market fully renovated, in today’s market. Not what it’s worth as-is, this afternoon, with the dated kitchen and the roof that’s seen better days. What it’d fetch after someone brings it up to retail condition.
That distinction is the whole game. Sellers often anchor on the ARV — “houses on my street sell for $320,000!” — when their house, in its current condition, isn’t one of those houses yet. ARV is the finish line. The offer works backward from it.
How to find your ARV (you can do this yourself)
You don’t need us to estimate your ARV. Here’s the same method a buyer or an appraiser uses:
- Pull sold comps — not listings. What houses listed for tells you nothing; what they closed at is the market. Use any public site that shows sold prices.
- Keep it close and recent. Within about half a mile, sold in the last 90 days. Texas markets move; a comp from two years ago is fiction.
- Match the house. Same rough beds, baths, and square footage. A 3/2 at 1,600 sq ft doesn’t comp to a 4/3 at 2,400.
- Look at the renovated ones. Among those comps, what did the fixed-up houses sell for? That’s your ARV.
One thing to skip: the Zestimate and the Redfin estimate. Automated valuation models are fine for a clean tract house in a busy subdivision and routinely 15–25% wrong on anything inherited, dated, or unusual — which is most of what we buy. Use real closed comps, or a Texas-licensed agent’s CMA (comparative market analysis), which is free and more reliable than any algorithm.
Don’t want to do the comp homework? That’s the single most common thing I hear — most people have never pulled a comp in their life. Tell us about your house and we’ll do it for you: pull the sold comps, estimate the repairs, and hand you the ARV and a written offer, free and with no obligation. Find out your ARV and get a cash offer →
Why the offer is a discount off ARV — not the ARV itself
This is the part that stings until you see the math, so let me be straight about it. Your offer is below ARV because, as-is today, the house isn’t worth ARV — it’s worth ARV minus everything it takes to get there and sell it. A buyer paying cash absorbs four real costs that a retail sale would otherwise charge you:
- Repairs. The actual cost to bring the house to that renovated, full-ARV condition.
- Holding costs. Property taxes, insurance, and financing for the months the house is being worked on and resold. In Texas, taxes alone run ~2.0–2.4% of value a year.
- Resale risk. If the market softens during the rehab, that’s the buyer’s loss, not yours.
- No commission to you. A retail sale clips ~6% in agent commissions plus closing costs and concessions off your top-line price. A direct cash sale doesn’t.
The 75–80% isn’t a markup we pocket — it’s the room those four costs require. The honest framing: a cash offer trades a lower gross number for zero repairs, zero commission, zero showings, and a close measured in days, not months. Whether that’s the better deal depends entirely on your house and your situation — which is exactly what the cash offer vs. listing math breaks down.
How condition moves the percentage
Why a range — 75 to 80 — instead of one number? Because condition and resale predictability move the dial:
| Your home’s condition | Where the offer lands |
|---|---|
| Cosmetic — paint, carpet, clean-up, minor updates | ~80% of ARV |
| Moderate — kitchen, bath, HVAC, roof, some systems | ~77% of ARV |
| Heavy / systemic — foundation, structural, full gut | ~75% of ARV (and a bigger repair number) |
A nearly-retail house in a hot, predictable submarket is low-risk to resell, so it underwrites toward the top of the band. A house with unknowns under the surface carries more risk on both the percentage and the repair estimate, so it lands lower. Two levers — the percentage and the repairs — set your final number.
A worked example
Say you’ve got a 3-bed/2-bath in a solid DFW submarket:
- ARV (what renovated comps nearby are closing at): $300,000
- Repairs needed (kitchen, one bath, HVAC, paint and flooring): ~$40,000 → moderate condition
- Percentage (moderate condition, predictable resale): 77%
The math:
- $300,000 × 77% = $231,000
- $231,000 − $40,000 = $191,000 offer
Now compare the retail path: list at $300,000, but first spend the $40,000 in repairs, then give up ~6% commission ($18,000), ~2% closing costs and concessions, and carry the house — mortgage, taxes, insurance — for the 60–90 days it takes to sell. Net those out and the gap between the two paths is far smaller than the headline $109,000 difference suggests. For a house that needs work, or a seller who doesn’t have $40,000 and three months to spare, the cash number frequently wins on net and certainty. For a clean house with time and patience, listing usually nets more — and I’ll tell you that honestly. The how-it-works overview walks through what the cash path looks like start to finish.
The bottom line
There’s no black box. Your cash offer is ARV × 75–80% − repairs — the renovated value of your house, multiplied by a percentage that reflects condition and risk, minus the cost to get it there. The percentage covers repairs, holding, resale risk, and the commission you skip, not a hidden markup. The two numbers that move your offer most are the ARV and the repair estimate, and you can pressure-test both — pull your own sold comps, get an agent’s CMA, and ask any buyer to show you the math in writing.
And if the comp homework isn’t your idea of a good weekend, that’s what we’re here for. Tell us about your house and we’ll hand you the ARV and a written, no-obligation offer — then you can run the numbers and decide. The math should always be yours to check.