How Much Do Repairs Really Cost? A Seller's Guide to ARV and Rehab Estimates
Former General Contractor & Rehab Estimator · July 30, 2026
Twenty years of pricing out renovation jobs taught me one thing above everything else: sellers almost never get an actual explanation of how an investor arrives at their offer number. You just get a figure, and it can feel like it came out of nowhere. It didn't. There's a formula behind it, and once you understand it, you can actually evaluate whether an offer is reasonable instead of just guessing.
The Formula Most Investors Actually Use
Most real estate investors, wholesalers, and rehabbers work backward from a version of this:
Offer Price = ARV × (some percentage, often 70-75%) − Repair Costs − Assignment/Profit Margin
Let's break down each piece, because each one is where the real disagreements happen.
What Is ARV?
ARV stands for After Repair Value — what the house would realistically sell for on the open market once it's fully renovated to a competitive, move-in-ready condition. This isn't a guess; a competent buyer pulls recent comparable sales ("comps") of similar homes nearby that have actually sold, ideally within the last 3-6 months, adjusted for square footage, lot size, bed/bath count, and condition. If a buyer gives you an ARV number without showing you comps, ask for them — a legitimate number should be defensible with real data, not a feeling.
Why Not Just Offer Based on Full ARV?
This is the part sellers push back on most, understandably. The percentage discount off ARV (commonly landing somewhere in the 70-75% range, though this varies by market and deal) exists because that gap has to cover several real costs on the buyer's side:
- Repair costs — the actual, itemized cost to bring the property up to the condition reflected in those comps
- Holding costs — property taxes, insurance, utilities, and (if financed) loan interest during the months the property is being renovated and isn't generating income
- Selling costs — when the investor eventually resells, they'll pay agent commissions, closing costs, and likely some negotiation room
- Profit margin — the reason they're doing this as a business at all, and the reason they're able to buy quickly, for cash, without a financing contingency
If a buyer's math doesn't leave room for all four of these, either they've made a mistake, or the number they're showing you isn't the real, final number.
Where Repair Estimates Actually Come From
A credible repair estimate isn't a round number pulled from a gut feeling — it should be an itemized list, roughly like:
| Item | Typical Range* |
|---|---|
| Roof replacement | $8,000-$15,000 |
| HVAC system | $5,000-$12,000 |
| Full interior paint | $3,000-$6,000 |
| Kitchen update (mid-range) | $10,000-$25,000 |
| Flooring (whole house) | $5,000-$15,000 |
| Foundation repair | $2,000-$25,000+ (highly variable) |
*These are illustrative national ranges, not a quote — actual costs vary significantly by region, material choices, and the specific scope of work, and only an in-person or contractor-reviewed estimate reflects your actual property.
Ask any buyer for the line-item breakdown behind their repair number. If they can't produce one, or the number changes dramatically without explanation, that's worth questioning.
Why Permits Can Quietly Change the Math
One thing sellers almost never think to ask about, and that can swing a repair estimate significantly: whether the scope of work requires permits, and whether prior work on the house was done with them. If a previous owner added a room, finished a basement, or redid electrical without pulling permits, a buyer planning to renovate has to factor in the cost of either permitting it retroactively (which can require bringing unpermitted work up to current code, sometimes an expensive surprise) or the risk of having to undo it. This is a real reason two buyers can look at the exact same house and arrive at meaningfully different repair numbers — one caught the unpermitted addition during their walkthrough, and one didn't.
It's worth checking your own permit history through your local building department before you're deep into negotiations. If you know about unpermitted work, disclosing it upfront (the same way you'd disclose a known repair issue) tends to build more trust with a serious buyer than letting them find it themselves during their own due diligence.
A Worked Example
Say a house has an ARV of $220,000 (based on real comps), needs an estimated $35,000 in repairs, and the investor works off a 72% ARV formula:
$220,000 × 0.72 = $158,400 $158,400 − $35,000 (repairs) = $123,400 estimated offer range
That $123,400 isn't an arbitrary lowball — it's the result of a specific formula with each input defensible on its own. Whether it's the right offer for you depends on how it compares to what you'd net after listing traditionally, paying for those same repairs yourself, covering agent commissions, and waiting out a longer timeline — which is a genuinely different calculation, and worth doing side by side rather than comparing raw numbers.
How to Evaluate Any Offer You Receive
- Ask for the ARV and the comps behind it
- Ask for the itemized repair estimate, not just a total
- Do the math yourself using the formula above and see if the numbers roughly reconcile
- Compare the net result (after this math) to what you'd realistically net from a traditional listing, accounting for repair costs you'd pay out of pocket, commissions, and time on market
Understanding the formula doesn't mean every offer is fair — but it does mean you're no longer just trusting a number. You're checking the math.
This article is for general informational purposes only and isn't legal, tax, or financial advice. Repair costs, market comps, and typical formulas vary significantly by region and property — consult a licensed contractor or real estate professional for numbers specific to your property.
