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Louisville Cash Offersby Cash Offer Match

How cash offers are calculated in Louisville

A cash buyer's offer starts with what your Louisville house would sell for after repairs and works backward from there. Many buyers use a rule of thumb of 70 percent of that after-repair value, minus the cost of repairs, which leaves room for their closing, holding and resale costs and their profit. Knowing the math helps you judge whether an offer is reasonable and spot one that is not.

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Part 1 of 5

Step 1: the after-repair value

Buyers estimate what the house would sell for once it is updated by looking at recent sales of comparable, renovated homes nearby. In Louisville that means sales in the same neighborhood and of a similar size and age, not the metro median of about $284,000. An updated bungalow in Crescent Hill and one in Shively sit in different markets.

Ask every buyer which sales they used. If two buyers disagree by a lot, the comparable sales usually explain why.

Part 2 of 5

Step 2: the repair estimate

Next comes everything the buyer expects to fix before reselling or renting. Louisville's housing is old, with the median Jefferson County home built in 1971, so estimates often include roofs, furnaces, electrical panels, plumbing and windows. Houses in a FEMA flood zone or one of the eight local preservation districts can need permits or approvals that add cost and time, and buyers price that in too.

  • Roof, gutters and any water damage
  • Heating, cooling and water heater
  • Electrical panel and wiring
  • Plumbing and sewer line
  • Foundation, basement water and drainage
  • Kitchens, baths, floors and paint

Part 3 of 5

Step 3: the 70 percent rule of thumb

Many investors cap their price at 70 percent of the after-repair value, minus repairs. With an after-repair value of $250,000 and $45,000 of repairs, that works out to $250,000 times 0.70, or $175,000, minus $45,000: about $130,000. The numbers are an illustration, not a quote.

The 30 percent that is held back is not all profit. It has to cover the buyer's closing costs on the purchase and the resale, Kentucky's transfer tax when they sell, months of property taxes, insurance, utilities and loan interest while the work is done, the agent commission when they list it, and then their margin. Some buyers stretch past 70 percent when homes sell fast and stay under it when the market is slow.

Illustration with round numbers, not a quote
Price after repairs (after-repair value)
$250,000
Times 70 percent, the investor rule of thumb
$175,000
Minus estimated repairs
− $45,000
Likely starting offer
$130,000

Real offers vary with the buyer, the house and the market. Some buyers stretch past 70 percent when homes sell quickly and stay under it when they do not.

Part 4 of 5

What can move an offer up or down

Two buyers can look at the same house and land on different numbers. These are the usual reasons.

  • Fewer or cheaper repairs than the buyer first assumed
  • A buyer who plans to rent the house values it on rent, not resale
  • A firm closing date or a flexible one, whichever helps the buyer
  • Tenants in place, which some buyers want and others avoid
  • Flood zone status or historic district rules that limit what can be done

Part 5 of 5

Compare what you keep, not just the price

Code enforcement liens, delinquent property taxes, judgments and the mortgage payoff all come out of the sale proceeds at closing. They do not change the buyer's offer, but they change what you walk away with, so ask each buyer for an estimate of your net after costs. Then compare the closing date, the inspection period and how much earnest money they will put down.

Questions

Questions about this

How do I know if a cash offer on my Louisville house is fair?

Ask the buyer to show the after-repair value and repair estimate behind the number, and compare at least two or three written offers. If one is far below the others, ask why. A comparative market analysis from a local agent tells you what the house might bring if you listed it instead.

Can I negotiate a cash offer?

Yes. An offer is a starting point. Repairs you have already done, a flexible closing date, or a competing written offer are all reasonable things to point to when you ask for more.

Sources

Where the facts on this page come from, with the date each source was read.

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