How Cash Home Buyers Calculate Offers (and How Paranova Property Buyers Does It)
Have you ever wondered how cash home buyers come up with their offers? If you’re thinking about selling your house for cash, you’re not alone in asking that question. Many homeowners worry about getting “lowballed” or not understanding how numbers are calculated.
At Paranova Property Buyers, we believe in being upfront and transparent. That means showing you exactly how most cash buyers make their offers, and how we do it differently. By the end of this page, you’ll understand the formulas investors use, the factors that affect your home’s value, and the flexible, homeowner-first approach we take to creating offers here in Arkansas.
The Generic Formula Cash Buyers Use
Most cash home buyers use a simple formula to figure out how much they can offer. It’s often called the “70% rule”, and it’s most common among investors who plan to fix and flip a property.
How the 70% Rule Works
- ARV (After Repair Value): What the home could sell for after all repairs and updates.
- Repairs: The estimated cost of renovations.
- Offer Formula: Cash Offer = (ARV × 70%) – Repair Costs
For example, if a house will be worth $200,000 after repairs and needs $40,000 in work:
- $200,000 × 70% = $140,000
- $140,000 – $40,000 repairs = $100,000 cash offer
At first glance, it looks like the investor is aiming for a 30% profit margin. But in reality, much of that margin is spent on costs before they see any net profit.
Why 70% (Where the Money Goes)
Here’s what that “30% margin” is really covering:
- Realtor Commissions on Resale: 5–6% of resale price ($10,000–$12,000 on a $200,000 home).
- Closing Costs on Resale: 2–3% ($4,000–$6,000).
- Holding Costs: Property taxes, insurance, utilities, HOA fees, which can add thousands over several months.
- Financing Costs: Interest on purchase and rehab loans, points, origination fees.
- Renovation Risk: Unexpected repairs like foundation, roof, or code upgrades.
- Market Risk: If the home takes longer to sell, holding costs increase and prices may need to be reduced.
- Business Overhead: Marketing, admin, staff, and general operations.
The Reality of Net Profit
After all of these expenses, the true profit margin is usually only about 10–15% of the resale value.
- On a $200,000 home, that means the investor may net $20,000–$30,000 if everything goes smoothly.
- If costs run over or the market shifts, profits can be even smaller.
This is why many cash offers seem lower than market value, as they aren’t based on greed but on covering costs, risks, and leaving enough room for a reasonable profit.
Why Cash Offers Are Usually Below Market Price
When you compare a cash offer to what you might see on Zillow or with a realtor, the numbers can look very different. But there’s an important tradeoff: equity for convenience, speed, and certainty.
Why the Offer Is Lower
- Repairs and Updates: Investors take on the cost (and risk) of bringing a house to market-ready condition.
- Time and Carrying Costs: While waiting for a resale, they pay taxes, insurance, utilities, and financing.
- No Middlemen: Realtor commissions and closing costs on the resale are built into the math.
- Risk Buffer: If the market shifts or repairs go over budget, the investors shoulder that loss, not the homeowners.
What Homeowners Get in Return
A cash sale removes the typical headaches of listing:
- No open houses, showings, or strangers walking through your home.
- No repairs or cleaning needed, investors buy houses as-is.
- No waiting months for a buyer’s financing to be approved.
- The ability to close quickly, or on a timeline that works best for you.
How Paranova Property Buyers Calculates Offers (Our Flexible Approach)
Unlike many national buyers who just throw out a formula, Paranova customizes each offer with transparency, flexibility, and creativity. Whether your home fits a flip, a rental, or a more creative deal, we’ll work with you to find a solution that’s fair and meets your needs.
Two Core Approaches
- Fix-and-Flip Properties: For homes that need major repairs, we use the After Repair Value (ARV) model. We estimate what the house will be worth after renovations, subtract repairs, closing/holding costs, and leave a margin to cover risk.
- Rental Properties: Not all homes fit the flip model. If your home works better as a rental, we evaluate it based on monthly income. After accounting for PITI (principal, interest, taxes, insurance), maintenance, repairs, and reserves, we aim for at least $200 in monthly cash flow.
Creative Solutions for Unique Situations
We go beyond the basics to offer strategies many buyers don’t:
- Subject-To Financing: For homeowners with little or no equity, we can sometimes take over your existing loan payments, giving you relief without needing equity in the home.
- Seller Financing: If you want the highest price possible, we can structure a deal where you act as the bank. You get steady monthly payments (plus interest), and we avoid high bank financing costs, a true win-win.
- Legal Support Referrals: If you’re dealing with problem tenants or squatters, we can connect you with attorneys who specialize in resolving those issues. For inherited properties, we can also connect you with experienced probate attorneys to help you navigate the legal probate process and make the sale as smooth as possible.
Flexibility That Fits Your Timeline
Every homeowner’s timeline is different, so we adapt:
- Fast Closings: We’ve closed in as little as 7 business days.
- Extended Closings: Need more time? We can wait up to 90 days to close.
- Delayed Occupancy: You can stay in the house after closing. We release part of your proceeds upfront, and hold the rest in escrow until you move.
- Tenant-Friendly Options: We can work with your renters to give them time to relocate.
- Extra Help: We’ve even hired movers and helpers to make transitions easier for sellers.
Why This Matters to You
At Paranova Property Buyers, we know every homeowner’s situation is different. That’s why we don’t just follow one formula. We look at your property and your needs to create the best possible solution.
Benefits of Selling to Paranova Property Buyers
When you sell your home to Paranova Property Buyers, you’re not just getting a cash offer, you’re getting a partner who puts your needs first. Here’s what sets us apart:
- Transparency: We explain exactly how we arrive at our offers so you understand the numbers.
- Flexibility: Whether you need to close fast, delay closing, or stay in your home after the sale, we adapt to your timeline.
- Convenience: No repairs, cleaning, showings, or realtor commissions. We buy homes as-is.
- Creative Options: From subject-to financing to seller financing, we provide solutions that work even if traditional buyers can’t.
- Local Expertise: We’re based in Little Rock, so we understand the Central Arkansas market and surrounding areas better than national companies.
Selling a home can feel overwhelming, but our goal is to make the process smooth, certain, and fair.
Frequently Asked Questions (FAQ)
Yes. Our offers are based on either the home’s resale value (if it’s a flip) or its income potential (if it’s a rental). We walk you through our numbers so you understand exactly how we arrived at the offer.
Not necessarily. If you have little or no equity, we can use creative strategies like subject-to financing, which allows us to take over the existing mortgage payments.
We’ve closed in as little as 7 business days. On the other hand, if you need more time, we can also wait up to 90 days to close.
We work with tenants and can give them time to relocate. If there are legal challenges such as squatters or problem renters, we can connect you with attorneys who specialize in those cases.
We offer delayed occupancy options. You can receive part of your proceeds at closing, with the rest held in escrow until you’re ready to move out.
Take the Next Step Today
Selling a house doesn’t have to be stressful or complicated. While many cash buyers rely on rigid formulas, Paranova Property Buyers takes a different approach. We combine local market knowledge, transparent calculations, and flexible solutions to create offers that are fair and tailored to your unique situation.
Whether your home is a good fit for a flip, a rental, or a creative financing strategy, our goal is the same: to give you speed, convenience, and certainty in the selling process.
If you’re ready to explore your options, we’d love to talk with you. Contact Paranova Property Buyers today at (501) 314-8710 for a free, no-obligation cash offer. We buy houses throughout Little Rock, Bryant, Benton, North Little Rock, Sherwood, Jacksonville, Maumelle, Conway, and across Central Arkansas.