How we come up with the number.

Offer = (ARV × 70%) − Repairs − Fee

That’s the whole thing. Every piece of it has a reason. Let’s go through it.

ARV stands for After-Repair Value. That’s what your house will sell for on the open market once it’s been fixed up, painted, and staged.

We figure out ARV by pulling recent sales of similar houses within half a mile of yours. Same size, same bedroom count, same general condition after fix-up. If your block has 5 houses that sold in the last 6 months for around $220,000 each after renovation, that’s your ARV.

We don’t guess this number. We don’t lowball it to pad our margin. If we’re wrong about ARV, we’re the ones who lose money on the resale. So we’re careful.

The 70% multiplier is standard across the real estate investment world. It covers the costs we eat on the back end of the deal:

• Holding costs — taxes, insurance, utilities, and debt service while we own the house (usually 4 to 6 months).
• Resale agent commissions — about 6% when we sell the fixed-up house.
• Closing costs — title, transfer tax, recording, and other fees on both ends of the deal.
• Contractor overruns — repair budgets always go over. 70% builds in a cushion.
• Profit — we need to make something for taking on the risk. Otherwise we don’t stay open.

Why not 75%? Or 65%? Because 70% is where the math has worked for wholesalers in Philly markets for years. We didn’t invent it and we can’t bend it much.

This is where most sellers get surprised. If a house needs a new roof, a new HVAC system, kitchen and bath gut, plumbing work, and electrical updates, the repair bill can run $40,000 to $80,000 on a Philly rowhome.

We use real contractor estimates, not made-up numbers. Watson walks through the repair list with you on the phone so you can see where every dollar goes. If you think our repair number is too high, tell us. Sometimes we adjust. Sometimes the number is the number.

Our fee is typically 8% to 12% of the purchase price. It goes on the offer sheet. You see it before you sign anything.

The fee covers our work: researching the house, making the offer, coordinating with the title company, showing up to closing, and handling problems that come up during the deal.

Here’s what the math looked like on a recent house we closed on in West Philly. Details anonymized to protect the seller’s privacy.

The seller in that deal was an estate executor. She had inherited the house, it was empty, and she lived out of state. She could’ve listed it with a real estate agent and probably gotten $120,000 to $140,000 after paying to clean it out, fix the roof, and sit through 4 months of showings. She took our $77,500 cash offer because the speed was worth more to her than the extra $40,000. That’s her call, not ours.

If a house only needs $10,000 of work, not $50,000, the repair subtraction is much smaller. So the offer lands higher — sometimes 50% to 55% of ARV. Good-condition houses with nothing more than paint and cleanout work get offers in that range.

If the house is clean, updated, and move-in ready, though, we’re not the right buyer. List it with an agent. You’ll clear 10% to 20% more than what we can offer.

• We don’t pad repair numbers to drop the offer. Every repair line is real contractor pricing.
• We don’t sandbag ARV. Lowballing ARV costs us money on the resale, so we don’t.
• We don’t hide the fee. It’s on the offer sheet in black and white.
• We don’t change the offer after you’ve signed unless we find something material we didn’t know about (like the house is condemned or the roof caved in since our walkthrough).

Every real estate cash transaction in Philly has to comply with FinCEN (the Financial Crimes Enforcement Network) rules on reporting beneficial ownership. Act Land Services, our title partner, handles that paperwork for us.

You don’t have to do anything different. We just have to say it, and Act Land has to file it. No extra cost to you.