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How much to offer on a fixer upper: the formula, repair costs and a worked example
Updated · by the LowBaller team
To decide how much to offer on a fixer upper, start with the after-repair value (ARV), subtract the full repair budget with contingency, holding and selling costs, and the profit you need. The 70 percent rule (pay no more than 70 percent of ARV minus repairs) is the quick ceiling many investors check first. The asking price barely matters. A fixer upper is worth what it will be worth when fixed, minus what it costs to get there and the risk you take on.
Below: repair cost ranges by scope, the full formula and the 70 percent shortcut side by side, a worked example to the dollar, the steps, and the seller angle that justifies a low cash offer. Repair costs vary widely by market and finish level, so every range here is illustrative. Get contractor bids before you commit.
The fixer upper offer formula
There are two ways to get to a number. The detailed way builds the offer from the bottom up: ARV minus repairs, holding costs, selling costs, financing costs and your profit. The shortcut is the 70 percent rule: ARV times 0.70, minus repairs. The 30 percent it holds back is meant to cover holding, selling, financing and profit in one bucket.
Use both. The shortcut is fast and keeps you honest on a first look. The detailed version tells you whether the shortcut is too loose or too tight for this house and your financing. When they disagree, trust the detailed one and find out why. The long version is in how to calculate maximum allowable offer.
Everything rests on ARV. Base it on recent sales of renovated homes nearby with similar size, beds, baths and lot, not on the fanciest sale on the street. The guide to ARV in real estate walks through the comps.
How much do fixer upper repairs cost?
Estimate by scope first, then refine with bids. A per-square-foot range gets you close on a first walk-through. Contractor bids, or at least a line-item estimate, should replace it before your offer is binding.
| Scope | What it usually includes | Typical range per sq ft | Example: 1,500 sq ft |
|---|---|---|---|
| Cosmetic | Paint, flooring, fixtures, light landscaping | $10 to $25 | $15,000 to $37,500 |
| Moderate | Cosmetic plus kitchen, baths, some systems | $25 to $50 | $37,500 to $75,000 |
| Heavy | Moderate plus roof, HVAC, electrical, plumbing | $50 to $100 | $75,000 to $150,000 |
| Gut or structural | Down to the studs, foundation, layout changes | $100 to $200+ | $150,000 to $300,000+ |
Big-ticket repairs to price separately
Per-square-foot ranges hide the items that blow up budgets. Give each of these its own line, and order a sewer camera inspection on any older house.
| Item | Why it matters | Illustrative cost range |
|---|---|---|
| Roof replacement | Insurers and lenders may balk at an old roof | $8,000 to $25,000 |
| HVAC system | Expensive and hard to defer in hot or cold climates | $6,000 to $15,000 |
| Electrical panel or rewire | Old panels and wiring are safety and insurance issues | $2,000 to $20,000 |
| Sewer line | Hidden until a camera inspection finds it | $3,000 to $15,000 |
| Foundation repair | Ranges from minor to deal-killing | $5,000 to $40,000+ |
| Windows | Major cost when the whole house needs them | $8,000 to $25,000 |
| Water heater | Cheap to replace but common in neglected houses | $1,200 to $3,500 |
Always add contingency
Add 10 to 20 percent on top of every repair estimate, more for older houses or any sign of water damage. The surprises in a fixer upper are rarely pleasant.
Worked example: how much to offer on a fixer upper
Example: a 1,500 square foot, 3-bedroom house listed at $239,000. Renovated homes nearby of similar size sold for $310,000 to $330,000 in the last six months, so you use an ARV of $320,000. It needs a moderate rehab: kitchen, two baths, flooring, paint and a water heater. At $35 per square foot that is $52,500, plus a 10 percent contingency, for $57,750.
The 70 percent rule says $320,000 times 0.70 is $224,000, minus $57,750, equals $166,250. The detailed version, assuming a cash purchase and a five-month project, allows up to $180,350 because it carries no loan costs. Add hard-money interest and points and it drops toward the 70 percent number.
So open at $160,000, about 33 percent under list, with a ceiling of $166,250 to $175,000 depending on your financing. Then check the equity cap: if the owner owes $200,000, no number you can pay clears the loan, and the deal is not there.
| Line | Amount | Assumption |
|---|---|---|
| After-repair value | $320,000 | Recent renovated sales nearby |
| Repairs with contingency | -$57,750 | $35 per sq ft plus 10% |
| Selling costs | -$22,400 | 7% of ARV for commission and closing |
| Holding costs | -$7,500 | 5 months of taxes, insurance and utilities |
| Buying closing costs | -$4,000 | Title, escrow and recording |
| Profit target | -$48,000 | 15% of ARV |
| Maximum offer | $180,350 | ARV minus everything above |
Example: where the $320,000 ARV goes
How to make an offer on a fixer upper, step by step
- 1
Pull renovated comps for ARV
Find three to five sales of renovated homes nearby from the last six months with similar size and layout. Use the middle, not the top.
- 2
Walk the house with a scope list
Room by room, note what must be replaced, repaired or left alone. Classify the job as cosmetic, moderate, heavy or gut.
- 3
Price the big-ticket items
Give the roof, HVAC, electrical, plumbing, sewer and foundation their own lines. Order a sewer camera inspection on older houses.
- 4
Add contingency
Add 10 to 20 percent to the repair total.
- 5
Run both formulas
Compute the 70 percent rule and the detailed maximum offer. Use the lower one unless you can explain the gap.
- 6
Check the seller's payoff
Your offer must clear the seller's mortgage and closing costs. If it cannot, pass or explore a different structure.
- 7
Write the offer with an inspection period
Make it contingent on inspection and contractor bids, then close fast once they are in.
Why do fixer upper sellers accept low cash offers?
A house that needs serious work has a smaller buyer pool. Many loan programs require a home to meet minimum property standards, so a house with a failing roof, broken systems or no working kitchen may not qualify for a typical mortgage. That leaves cash buyers and renovation loans, and fewer buyers means less competition for your offer.
The owner faces a choice they often cannot fund: spend $50,000 they may not have, or sell as-is to someone who will. A fair as-is cash offer is not a trick. It is the price of the house in its current condition, paid by the buyer taking the risk.
When a fixer upper also carries hard distress, such as a scheduled auction or deep tax delinquency, LowBaller's model targets start bids around 40 to 50 percent under estimated value, capped so the offer still clears the owner's mortgage and closing costs. Check any address with LowBaller's free distress check, and test a number with the lowball offer calculator.
How much below asking should you offer on a house that needs work?
Ignore the percentage and do the math. In the worked example, the math landed 33 percent under the asking price. On a house that only needs paint and carpet, the same math might land 5 percent under. Price from ARV and repairs, and the percentage under asking is simply the result.
If the seller priced the house as if it were move-in ready, show them the repair bids and the renovated comps side by side. That conversation is easier than defending a percentage. More on the discipline in what to offer on a distressed property.
Frequently asked questions
How much should I offer on a fixer upper?
Take the after-repair value and subtract repairs with a 10 to 20 percent contingency, holding costs, selling costs and your profit. As a quick ceiling, use the 70 percent rule: ARV times 0.70 minus repairs. A house with a $320,000 ARV needing $57,750 of work supports about $166,250 under that rule.
How much below asking price should I offer on a house that needs work?
There is no fixed percentage. Run the numbers from after-repair value and repair costs, and the percentage under asking is whatever falls out. A house needing only paint may justify 5 percent under, while one needing a roof, systems and a kitchen can justify 30 percent or more under a move-in-ready price.
Is the 70 percent rule still realistic?
It is a useful ceiling, not a law. In expensive markets or with cheap financing, some investors stretch past 70 percent; with high interest costs or thin margins, 70 percent may be too generous. Always confirm the shortcut with a detailed line-by-line maximum offer for the specific house and your actual financing.
How do I estimate repair costs on a fixer upper?
Start with a per-square-foot range for the scope, cosmetic, moderate, heavy or gut, then price big-ticket items like the roof, HVAC, electrical, plumbing, sewer and foundation separately. Add 10 to 20 percent contingency. Replace the estimates with contractor bids during your inspection period, before the offer becomes binding on you.
Can you get a mortgage on a fixer upper?
Sometimes. Standard loans may require the home to meet minimum property standards, so a house with major defects might not qualify. Renovation loans that fund the purchase and repairs together exist, with extra requirements. Many investors buy fixer uppers with cash or short-term loans and refinance after the work is done.
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Find motivated sellersKeep reading
- The 70% rule in real estate: the formula, worked examples, and when it fails
- How to calculate maximum allowable offer (MAO): the formula, worked examples, and the seller check
- What is ARV in real estate? How to calculate after repair value from comps
- What to offer on a distressed property: the formula
- Lowball offer on a vacant house: how to find the owner and price the offer