What the 70 percent rule is
The 70 percent rule is a convention used by people who buy houses to renovate and resell. It says that the most a buyer should pay is roughly seventy per cent of the property's value once repaired, minus the cost of the repairs.
Written out: offer equals seventy per cent of the after repair value, less repairs.
It is not a law, a standard, a regulation or an appraisal method. It is a rule of thumb that circulates in investing courses and on forums, it varies between operators and markets, and plenty of buyers do not use it at all. We do not price from a percentage, and our article on how cash offers are calculated explains the arithmetic we do use and why we decline to publish a percentage.
So why write about it? Because sellers meet it. Somebody says "we work on seventy per cent", and a seller needs to know what that sentence does and does not tell them.
What it looks like with numbers
Take a house that would be worth 200,000 dollars once it is fully repaired, needing 30,000 dollars of work. These are round numbers chosen to show the shape of the arithmetic. They are not a quote and not a claim about what any particular Tulsa house is worth.
- Seventy per cent of 200,000 is 140,000
- Less 30,000 of repairs
- Offer: 110,000
Notice what just happened. The seller hears a number that is 55 per cent of the repaired value and assumes somebody is being opportunistic. But two separate things were subtracted: the repairs, which are a real cost somebody has to pay, and the thirty per cent, which is everything else about the transaction.
Notice also how sensitive the result is to the two inputs. If the repaired value is really 185,000, the offer drops to 99,500. If the repairs are really 45,000, it drops to 95,000. The rule is simple arithmetic on two numbers that are both estimates, which is the whole problem with it as a basis for a conversation.
What the 30 percent is actually for
Sellers assume it is profit. Some of it is. Most of it is costs that do not appear in the repair figure:
- The cost of buying, including closing costs the buyer covers
- Holding costs for the months of work and the months of resale: interest or the cost of capital, insurance, property tax, utilities, lawn, security. Our holding cost calculator shows how fast that accumulates
- The cost of selling again: commission on the resale, closing costs, concessions to the eventual buyer
- Being wrong about the repairs, which is routine. Opening a wall finds something. The roof needs decking. The panel has to be replaced after all
- Being wrong about the value, which is worse, because it compounds with the time the house sits unsold
- And profit, which is the part left over and which is a great deal smaller than sellers assume once the list above is paid
That is why a buyer will not pay 95 per cent of repaired value minus repairs. The deal would lose money on any adverse surprise, and adverse surprises are the normal case in this work.
Why it misleads sellers
Three reasons, and all three matter.
It sounds like a valuation and it is not. The rule contains no judgment about your house. It is a budgeting constraint about the buyer's own risk, applied to two estimates. Hearing "seventy per cent" tells you nothing about what your property is worth.
It hides the arguments. The percentage is the least interesting number in the equation. The repaired value and the repair estimate are where the real disagreement lives, and they are both arguable with evidence. A buyer who talks about the percentage is discussing the one part that is not about your house.
It invites the wrong comparison. A seller who learns the rule starts comparing offers by reverse engineering percentages instead of comparing net proceeds against a listed sale, which is the comparison that actually decides anything.
If a buyer quotes it at you
Ask these four things, in this order:
- What repaired value are you using, and how did you get it? Recent comparable sales, with addresses, or an automated estimate? Across much of Tulsa a single block holds housing from four decades, which is where automated valuation performs worst
- Show me the repair estimate, itemised. Not a percentage of value, not a figure per square foot. A list. If a buyer basing an offer on repair cost cannot show the cost, that is the answer to a different question
- Will the price change after an inspection? The single most useful question in this industry, and the answer separates operators more reliably than anything else. Get it in writing
- What would a listed sale net me? If the buyer will not engage with that honestly, you are talking to somebody who is not on your side of the table
Our page on whether cash home buyers are legitimate covers verifying anybody before you get this far, and the six kinds of cash buyer covers telling which sort you are dealing with.
What to compare instead
Forget percentages. Put two columns side by side and compare the bottom lines:
- A written cash offer, with every deduction itemised and a statement that the price is final
- A listed sale at a realistic price, minus commission, seller closing costs, pre-listing repairs, inspection credits, concessions and the months of holding cost
Our net proceeds calculator is built to hold both, and our page on a cash offer against listing with a realtor works through the full comparison. If the listed column wins, list it. It often does, and we say so.
The short version
The 70 percent rule is seventy per cent of repaired value minus repairs. It is a buyer's budgeting convention covering purchase costs, holding costs, resale costs, the risk of being wrong and a profit, and it contains no opinion about your house at all.
Ignore the percentage. Argue about the repaired value and the repair estimate, get a written statement that the price will not change after inspection, and compare the net against what a listing would leave you. We publish our own arithmetic and attach the repair estimate to every offer, which is the standard to hold any buyer to.
Frequently asked questions
What is the 70 percent rule?
A convention used by people who buy houses to renovate and resell: pay no more than about seventy per cent of the property's after repair value, minus the cost of repairs. It is a rule of thumb rather than a standard or a valuation method.
How do you calculate the 70 percent rule?
Take the value the house would have once fully repaired, multiply by 0.7, then subtract the repair cost. On a 200,000 repaired value with 30,000 of work, that is 140,000 less 30,000, so 110,000.
Why do cash buyers not pay closer to full value?
Because the gap covers purchase costs, months of holding costs, the cost of selling again including commission, the routine risk of being wrong about the repairs or the value, and a profit. Most of it is cost rather than profit.
Is the 70 percent rule an appraisal of my house?
No. It contains no judgment about your property at all. It is a budgeting constraint about the buyer's own risk applied to two estimates, which is why hearing a percentage tells you nothing about what your house is worth.
Which number should I argue about?
The repaired value and the repair estimate. Those are where the real disagreement lives and both are arguable with evidence. The percentage is the least interesting number in the equation.
Do all cash buyers use the 70 percent rule?
No. It varies by operator and by market and plenty do not use a percentage at all. We do not, and our article on how cash offers are calculated explains the arithmetic we use instead.
What is after repair value?
What the property would be worth once it has been fully repaired and is sellable to an ordinary financed buyer. It should come from recent comparable sales, and it is the input most likely to be wrong when it comes from an automated estimate.
What should I ask a buyer who quotes me a percentage?
What repaired value they are using and how they got it, to see the itemised repair estimate, whether the price can change after an inspection, and what a listed sale would net you.
Does the rule change for a house in good condition?
In practice yes, because the whole model assumes a property that needs work and cannot be financed as it stands. If your house is financeable, insurable and in reasonable condition, the right comparison is a listed sale and it will usually win.
Is a lower percentage a sign of a bad buyer?
Not necessarily, and a higher one is not a sign of a good one. An offer that is revised downward after an inspection is worth less than a lower offer that holds, which is why the written statement about price changes matters more than the headline.
How do I compare two cash offers properly?
On net proceeds with every deduction itemised, not on headline price, and both against what a listed sale would realistically leave you after commission, repairs, credits and months of holding cost.
Will you tell me if listing would net me more?
Yes, and we say it on every page of this site. If the house is financeable and in reasonable condition and you can wait, a good local agent will very often beat us.
We buy houses, so we have an obvious interest in how sellers understand offer arithmetic. The figures in the worked example are round numbers chosen to show the shape of the calculation, not a quote and not a claim about any particular property's value. The 70 percent rule is an industry convention rather than a standard, and nothing here is valuation or financial advice.