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How Do "We Buy Houses" Companies Work? The Complete Explanation

Every step of the process, how offers are calculated, and what separates a legitimate buyer from a scam.

Quick Summary

  • Cash buyers are real estate investors, not banks or government programs
  • Offers are calculated using a standard formula: ARV × 70% − Repairs = Offer
  • The process: submit property → receive offer → sign agreement → title search → close in 7–21 days
  • Closing happens at a licensed title company — no lender involved
  • You pay zero commissions and zero closing costs
  • You can back out before signing — there's no obligation from getting an offer

Who Are Cash Home Buyers?

Cash home buyers are private real estate investors who purchase homes directly from sellers using their own capital — no bank, no mortgage, no financing contingency. They buy homes with the intention of renovating and reselling them (fix-and-flip), holding them as rental properties, or reselling to other investors.

Unlike real estate agents (who represent you in a sale but don't actually buy your home), a cash buyer is the actual purchaser. Unlike iBuyers (tech companies that buy homes algorithmically), local cash buyers like Threshold Property Group personally evaluate every property and make individualized offers based on local market conditions.

The Step-by-Step Process

1
Submit your property — Fill out a short form online or call. We ask for the address, condition, and your situation. No commitment required. Takes 5 minutes.
2
We research and calculate your offer — We review recent comparable sales (comps) in your area, estimate repair costs, and apply our pricing formula. This takes 24 hours or less.
3
You receive a written offer — A clear offer letter stating the purchase price, proposed closing date, and any conditions (usually just clear title). No hidden assignment clauses.
4
You accept (or not) — You have time to think it over. There's never pressure to sign immediately. If you accept, we open escrow with a licensed title company.
5
Title search — The title company searches for liens, judgments, or ownership issues. Most title work takes 5–10 business days. We handle any title issues we can — if there are liens, they're typically paid from closing proceeds.
6
Closing day — You sign at the title company (or via mobile notary if you prefer). The purchase price is wired to your account same day or next business day. Keys and possession transfer. Done.

How Cash Offers Are Calculated — The ARV Formula

Every legitimate cash buyer uses a variation of the same formula. Understanding it helps you evaluate whether an offer is fair:

The Formula
(ARV × 70%) − Estimated Repairs = Cash Offer

ARV (After Repair Value) is what your home would sell for on the open market if it were fully renovated. We determine this by looking at recent comparable sales (similar homes, similar size, similar location) in your neighborhood.

The 70% rule accounts for the investor's holding costs (property taxes, insurance, utilities while renovating), renovation costs, selling costs when they eventually list the property, and profit margin. Without that margin, no investor can stay in business.

Real Example

  • Your home's ARV (fully renovated): $280,000
  • Estimated repairs needed: $35,000
  • Formula: ($280,000 × 70%) − $35,000 = $196,000 − $35,000
  • Cash offer: approximately $161,000

But remember: after agent commissions, repairs, and carrying costs, a traditional listing on this same home might net $220,000–$240,000 — not $280,000. The gap between a cash offer and a traditional sale is real, but it's often smaller than it first appears.

Cash Buyer vs. iBuyer vs. Wholesaler — Key Differences

Type Who Buys Fees Conditions Required
Local Cash Buyer The company you signed with $0 to seller Any condition
iBuyer (Opendoor etc.) Tech company 5–8% service fee Good condition, limited markets
Wholesaler Another investor (you never meet them) Unknown Varies — deal may fall through

Wholesalers are the biggest red flag. A wholesaler doesn't actually buy your home — they put it under contract with an "assignment clause" that lets them sell the contract to another investor. If they can't find a buyer, your deal falls through. Always ask: "Will you personally be purchasing this property, or do you intend to assign this contract?" A legitimate cash buyer like Threshold Property Group always purchases directly — no assignments.

Common Questions

Do I need to be present at closing?

Not necessarily. Many sellers close remotely via mobile notary, especially military and out-of-state sellers. The title company coordinates everything.

Can I back out after signing?

Before signing a purchase agreement, you have no obligation. After signing, there's typically a short inspection period (usually 0–7 days for cash buyers) during which either party can cancel. Read the contract carefully.

Are there any fees or hidden costs?

A legitimate cash buyer charges you nothing. No commissions, no closing costs, no processing fees. The offer price is what you receive (minus any existing mortgage or liens, which are paid out of every real estate closing).

Do you do a home inspection?

Cash buyers may do a walkthrough to verify condition, but we don't require a formal home inspection and we don't ask you to fix anything as a result of what we find. We buy truly as-is.

See What We'd Offer for Your Home

Submit your property details and get a written cash offer in 24 hours. No obligation, no pressure. Just a clear number so you can make an informed decision.

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