What a cash sale really costs you next to a listing
Why the gap between a cash offer and a list price overstates the loss, which costs a listing takes before you see a check, a worked example in round numbers, and a simple way to find the cash price that matches your listing net.
What you lose selling for cash is the difference between the cash offer and what a listing would actually net you, which is far less than the gap to the list price. A listing pays commissions, seller closing costs, repairs, concessions and months of carrying costs. Subtract those from the expected price, then compare that net to the offer.
Compare what lands in your account, never the sticker.
The question usually arrives as a percentage. Someone heard cash buyers pay a fraction of value, or saw an online figure, and wants to know how big the hit is. Amy and Jenny, who make cash offers on houses across Northern Colorado, get asked this nearly every week. The useful answer is a method, because the number depends entirely on the house.
Here is the method. Take what the house would realistically sell for on the market, in the condition a retail buyer expects. Subtract everything a listing costs you between today and the closing table. What is left is your listing net. A cash offer should be measured against that figure, and the difference between the two is what a cash sale costs you.
For a move-in ready house in a strong market, that difference can be large, and listing is usually the better choice. For a house that needs work, sits on the market or costs you money every month, the difference shrinks fast. This guide walks through both.
Why the list price is the wrong number to compare
A list price is an asking price. The house may sell above it, at it or well below it, and the check you receive is smaller still once the costs of selling come out. Comparing a cash offer to the list price measures the offer against money you were never going to receive.
Even the sale price overstates it. A buyer’s inspection often produces a repair request or a credit, appraisals sometimes land below the price, and every month on the market costs you a mortgage payment, taxes, insurance and utilities. Those are real dollars, and they come out of your share.
Net against net. That is the only fair comparison.
What a listing costs before you see a check
Commissions are the largest line for most sellers. They are negotiable, they vary by brokerage, and they are often split between the listing agent and the buyer’s agent, so use the rate in your own listing agreement or the one you have been quoted. On a mid-priced Colorado house, even a modest rate is a five-figure number.
Seller closing costs come next: title insurance and closing fees, any HOA transfer fees and prorated property taxes. Then preparation. A house going on the market usually needs paint, cleaning, landscaping and the repairs a buyer’s lender would require, plus whatever the inspection turns up after you are under contract.
The last line is time. If the house takes three or four months to list, sell and close, multiply your monthly carrying cost by that number. Sellers who already bought their next house pay that twice.
Add the lines up honestly, with your own figures.
Read more: Sell a House Without a Realtor: Three Ways, Costs, and Paperwork →
- Commission, at the rate in your listing agreement
- Seller closing costs and title fees
- Repairs and preparation before listing
- Inspection credits or price reductions after the contract
- Carrying costs for every month until closing
A worked example in round numbers
Take an illustrative house that would sell for $400,000 once it is repaired and staged. It needs a roof and interior work that a contractor bids at $25,000. Suppose the listing agreement sets commission at five percent, which is $20,000, seller closing costs run about $4,000, and the buyer’s inspection leads to a $5,000 credit. The house takes four months from prep to closing, at $2,500 a month in mortgage interest, taxes, insurance and utilities, which is another $10,000.
Add those up and the listing costs $64,000 before any mortgage payoff. The listing net is $336,000. That figure, and not $400,000, is what a cash offer on this house should be measured against.
Now suppose a cash offer of $300,000, a made-up figure for this example, with the buyer paying the seller’s closing costs and no repairs or commission. The cash sale costs this seller about $36,000 compared with the listing, or roughly nine percent of the retail price. That is the real trade: $36,000 in exchange for no repairs, no showings, no failed-contract risk and a closing date the seller picks.
These figures are an example, not a quote or market data. Run your own.
Why a cash buyer pays less than a retail buyer
A cash buyer takes on the work and the risk you are handing off. The buyer pays for the repairs, carries the house while the work is done, pays to sell it again afterward, and absorbs any surprise found behind the walls. A margin has to remain at the end, or nobody would do it.
Some investors use rules of thumb, such as the 70 percent rule, which caps an offer at seventy percent of the after-repair value minus the repair costs. Rules like that are shortcuts. The offer you receive should show how the buyer reached its number, so you can check each piece against your own estimate.
Ours do. The breakdown is on the page that explains how we calculate an offer.
Read more: How Much Do Cash Buyers Pay for Houses? Our Offer Math, Shown →
When the cash sale costs less than it looks
The gap narrows whenever a listing carries extra costs or extra risk. A house that needs a roof, a foundation repair or a sewer line replacement either gets fixed before listing or gets priced down for financed buyers, and both cost you. A house that has already sat on the market keeps adding carrying costs. A house with tenants, a probate timeline or two mortgage payments behind it puts a dollar value on every month.
Some sellers simply value certainty. A fixed closing date, no showings and no contract that falls apart in week three are worth something, and only you can decide how much.
Read more: House Not Selling? What to Do Next and When a Cash Sale Fits →
When listing clearly wins
List the house if it is in good condition, priced to the market, and you can afford to wait. In that case the costs of listing are mostly commission and closing costs, the risk is low, and a retail buyer will usually pay more than any cash buyer can. We tell sellers in that position to list.
Remember the tax side too. Either way, the profit on a sale may be partly or fully tax-free under the federal home sale exclusion, and the method of sale does not change the rules.
Read more: Capital Gains Tax When You Sell a House in Colorado →
Listing the example house or a cash sale of the same house.
Listing the example house
- Expected sale price $400,000 after repairs and staging
- Repairs before listing $25,000, paid by the seller
- Commission $20,000 at the example rate
- Closing costs and credits $9,000
- Four months of carrying costs $10,000
- Net before mortgage payoff $336,000
A cash sale of the same house
- Cash offer $300,000 as it stands
- Repairs before listing None
- Commission None
- Closing costs and credits Paid by the buyer
- Carrying costs Stop at a closing date the seller picks
- Net before mortgage payoff $300,000, about $36,000 less
Questions homeowners ask us.
What are the pros and cons of selling a house for cash?
The gains are speed, certainty and no repairs, showings or commission, plus a closing date you choose. The cost is price: a cash buyer pays less than a retail buyer would for the same house after repairs, because the buyer takes on the work, the holding time and the resale risk.
What is the 70 percent rule for flipping houses?
An investor rule of thumb: offer no more than seventy percent of the after-repair value, minus the cost of repairs. It is a shortcut for screening deals and varies by buyer. Any offer you receive should show its own math so you can check each part.
If I sell my house for $300,000, how much do I actually keep?
Start with $300,000 and subtract your mortgage payoff, commission at your agreed rate, seller closing costs, any repair credits and the months of carrying costs. What remains is your net. Taxes on the gain are a separate question, and many owners owe none on a main home.
What happens to the profit when you sell a house?
It is paid to you at closing after the mortgage, liens and selling costs are paid. For a main home you owned and lived in at least two of the last five years, up to $250,000 of gain, or $500,000 for a married couple filing jointly, can be excluded from federal income tax.
How do I work out the break-even cash offer for my house?
Estimate a realistic retail price, then subtract commission, closing costs, repairs, likely credits and carrying costs until closing. That listing net is your break-even figure. A cash offer near it costs you little; one well below it costs the difference.
Is a cash offer always lower than what a listing would bring?
Lower than the retail price, nearly always. Lower than the listing net, not always. On a house that needs heavy work or would sit for months, the gap after costs can be small.
Run the math with a real number. Ask for ours.
Tell us about the house, and within 24 hours of that conversation you will have a written cash offer that shows how we reached it. Put it beside your listing net and decide. There are no fees or commissions, and we cover the seller’s closing costs.