Cash and Wholesale Offers

When someone offers to buy your house for cash—especially below what you expected—your first instinct might be that it's a scam or an insult. This page explains how cash offers actually work, what drives the pricing, and how to evaluate whether what you're seeing is predatory or just a different kind of transaction with different tradeoffs.

Understanding Cash Buyers

Not All Cash Buyers Are the Same

"Cash buyer" sounds like a single category. It isn't. The person offering you cash could be operating from any of several different business models, each with its own pricing logic.

Wholesalers typically offer 60-70% of a property's after-repair value. Their business is finding deals and assigning contracts to other investors—they're middlemen, not end buyers. Fix-and-flip investors offer a bit more, usually 65-75% of ARV, because they plan to renovate and resell. Buy-and-hold investors, who want rental properties, sometimes go higher still—70-80%—because their profit comes from long-term income, not a quick flip. And iBuyers (institutional instant buyers like Opendoor) operate on an entirely different model: they offer 90-95% of market value, then subtract a service fee of 5-7%.

The same property, in the same condition, can receive legitimate offers ranging from 60% to 90% of its value—depending on who's making the offer and why.

This range exists because each type of buyer applies a different formula.

The Math Behind the Offer

Investor pricing follows a formula. The standard version is called the 70% rule: Maximum Allowable Offer equals the After-Repair Value times 70%, minus repair costs.

ARV is what the property will be worth after renovation—what a retail buyer would pay for it fixed up. The repairs are what it takes to get there. The 30% that disappears from the calculation covers three things: roughly 10% for holding costs while they renovate and resell, 10% for transaction costs on both the purchase and sale, and 10% for profit margin.

A property worth $200,000 after repairs, needing $30,000 in work, produces this calculation: $200,000 times 0.70 equals $140,000, minus $30,000 in repairs, equals a maximum offer of $110,000. That's 55% of the after-repair value—which may feel like an insult until you see where the other 45% goes.

This formula isn't arbitrary. It's the math that makes the business sustainable. When an investor offers you less than your Zillow estimate, they're not pulling a number from thin air. They're applying a formula to their estimates of value and repairs.

If you know the formula, you can evaluate whether a specific offer makes sense.

Checking Their Math

If you know the formula, you can work backwards from any offer.

Take the offer amount, add their estimated repair cost, then divide by 0.70. That gives you the ARV they're assuming. Compare it to recent comparable sales in your area. If their ARV is too low, that's where the disconnect is. If their repair estimate is too high, same thing. If both numbers seem reasonable—if their ARV matches comps and their repair estimate matches reality—then the offer is consistent with standard investor math, even if it feels low.

This doesn't mean you have to accept. It means you understand what you're looking at. An offer that's "insulting" because the buyer underestimated your property's potential is different from an offer that's fair by investor standards but not what you want.

What You're Trading

What You Get Besides Price

Cash transactions typically close in 14 to 21 days. Financed purchases take 30 to 45. That's not just convenience—it's weeks of your life, weeks of carrying costs, weeks of uncertainty.

The certainty gap matters too. Cash offers close at rates around 95% or higher. Financed offers fall through 20-25% of the time—financing denied, appraisal too low, buyer gets cold feet. When a financed deal fails after three weeks, you start over. When a cash deal closes, it closes.

These aren't abstract benefits. Speed means fewer mortgage payments, insurance bills, and tax installments. Certainty means not having to relist, not having to explain to the next buyer why the last deal fell through. The discount you see in a cash offer is, in part, payment for what you're receiving: a faster, more certain path to closing.

This timeline difference also affects what you spend while waiting.

The Cost of Waiting

Every month you hold a property costs money. Mortgage payment, property taxes, insurance, utilities if it's vacant, maintenance whether you live there or not. These carrying costs typically run 1-2% of a property's value per month.

On a $200,000 property, that might be $2,000-$4,000 monthly. Wait three months for a higher retail offer and you've spent $6,000-$12,000 in carrying costs. If the retail offer comes in $8,000 higher than the cash offer, and you spent $9,000 waiting for it, you lost money by holding out for more.

This math doesn't make cash offers "good" or retail offers "bad." It means the comparison isn't just about sale price. Time has a cost. The real comparison is net proceeds after carrying costs—not headline numbers.

Beyond speed and certainty, cash buyers also handle condition differently.

What "As-Is" Transfers

Selling as-is means transferring responsibility for the property's condition to the buyer. No repairs before closing. No credits for issues discovered. No liability for problems that surface later (beyond disclosure requirements, which vary by state).

For properties with significant issues, this matters beyond convenience. FHA loans—the most common first-time buyer financing—require properties to meet Minimum Property Requirements. Peeling paint, broken windows, non-functional systems, safety hazards—any of these can fail FHA inspection. A property that doesn't pass can't sell to an FHA buyer at any price. The buyer pool shrinks to cash or conventional financing, and conventional lenders have their own standards.

Cash buyers don't need the property to qualify for financing. They buy what's there. The discount they offer isn't just paying less—it's absorbing the risk and responsibility that you'd otherwise carry through a traditional sale.

How Cash Deals Work

Who You're Actually Dealing With

The person who makes you an offer may not be the person who buys your house.

In a wholesale transaction, the original buyer puts your property under contract, then assigns that contract to another investor for a fee—typically $5,000 to $20,000. You close with whoever they assign to. This isn't hidden if you're looking: the contract will say "ABC Investments and/or assigns" in the buyer line.

In a double-close (or back-to-back closing), the wholesaler actually purchases the property, then immediately resells it to their end buyer. Two transactions, same day. The difference: in a double-close, you don't see what they resold for.

Neither structure is illegal. But understanding which you're in tells you something important: if the person making the offer needs to find another buyer before closing, there's a risk they won't. Assignment creates a step that can fail. State regulations on wholesale vary; some require disclosure, some require licensing for certain activities.

Knowing the structure tells you one thing; knowing who you're dealing with tells you another.

Separating Legitimate from Predatory

Legitimate cash buyers and predatory operators both want your property. They're distinguishable.

Proof of funds can be verified. A real bank statement or financial institution letter includes contact information. You can call to confirm. If the buyer balks at verification, or if the document looks altered, that's information. Legitimate buyers expect verification.

Business entities can be checked. Every LLC or corporation is registered with the state—you can look them up on your state's Secretary of State website. You'll see when they registered, who the registered agent is, whether they're in good standing. An entity you can't find may not exist.

Behavior patterns reveal intent. Legitimate buyers give you time to think and encourage you to consult an attorney. Predatory operators create artificial urgency ("this offer expires today"), discourage legal advice ("you don't need a lawyer for this"), and avoid meeting at their office. These patterns aren't proof of wrongdoing, but they're the patterns that wrongdoing tends to follow.

Verification of the buyer matters. So do the terms they're offering.

What the Contract Reveals

Price matters. So do the terms around it.

Earnest money signals commitment. Standard practice is 1-3% of the purchase price—on a $150,000 property, that's $1,500 to $4,500. An offer with $100 or $500 earnest money means the buyer can walk away cheaply. Their money isn't at stake.

Inspection periods define how long the buyer can exit freely. Seven to fourteen days is typical for cash buyers who already know what they're getting into. Twenty-one days or longer, especially with extension rights, suggests a buyer who needs time to find their own buyer or financing. The longer the period, the more they can tie up your property without real commitment.

Contingencies create exit routes. Standard contingencies (inspection, clear title) are normal. Vague contingencies ("subject to partner approval," "at buyer's sole discretion") are escape hatches. They let the buyer back out for any reason without losing earnest money. A contract full of exit routes isn't a commitment—it's an option they're holding on your property.

The Bigger Picture

The Question Isn't "Scam or Insult"—It's "What Am I Trading?"

Cash offers for the same property vary by 15-25%. One seller received $85,000, $95,000, and $107,000 (net after iBuyer fees) for the same house. Same condition. Same market. Different buyers, different math, different results.

This tells you two things. First, the initial offer isn't the only offer. Shopping matters. Getting a second or third number takes days, not weeks. Second, the "right" price depends on what you're optimizing for. Speed? Certainty? Highest net proceeds? Avoiding repairs? These pull in different directions.

A cash offer below market value isn't automatically a scam or an insult. It may be a rational offer from a business that needs margin to work—and that margin pays for something you're receiving. The question isn't whether to feel insulted. The question is whether the tradeoff makes sense for your situation.

To evaluate any cash offer, you need four things: understanding of the math (is their ARV and repair estimate reasonable?), verification of the buyer (can you confirm they're real and capable of closing?), review of the terms (do they signal commitment or escape routes?), and comparison to alternatives (what would you net from other buyers or a retail sale?).

The seller who understands these dimensions isn't evaluating offers with gut feeling. They're making a decision based on what they're actually receiving.

Related Pages

Situations where this applies:

• When You're Behind on Payments — cash and wholesale offers often target distressed sellers

• When Your Property or Title Has Problems — cash buyers accept properties that can't sell traditionally

• When You Just Want Out — speed and certainty may matter more than maximum price

Related structures:

• Subject-To Transactions — another offer type you may see from investors

• Loan Assumption — how loan transfers work differently

Go deeper:

• Understanding Seller Risk — risk dimensions across all transaction types

• Red Flags and Warning Signs — detailed verification checklists

• Contracts and What They Mean — understanding contract terms in depth

Disclaimer: This information describes how cash and wholesale transactions generally work. Legal requirements, disclosure obligations, and standard practices vary by state. Nothing here constitutes legal or financial advice. Consult a licensed professional for guidance specific to your situation.

For help evaluating a specific offer, see Red Flags and Warning Signs and Questions to Ask Before Signing.