All guides · MAO calculator · ARV calculator · Repair estimate
The formula
Buyer's maximum price = after repair value − repair costs − transaction and holding costs − buyer's required margin.
Seller contract price ceiling = buyer's maximum price − proposed assignment fee.
Start with after repair value, or ARV. Estimate it from relevant sold properties, adjusting for differences you can explain. Then estimate repairs with the property in mind, not a blanket dollar amount. Add transaction and holding costs such as closing, financing, utilities, insurance and selling costs where they apply. Finally, work out what the end buyer needs the deal to leave them. That may vary by buyer and property. The assignment fee is the proposed difference between your seller contract price and the buyer's price in an assignment structure.
Each part of the formula can be wrong. An online value estimate can miss condition. A seller may not know about a hidden repair. A buyer may use a different sale comp or need a different margin. If an important input is unknown, mark the MAO as provisional and find the missing fact before presenting an offer as firm. The step-by-step wholesale guide shows where the formula fits in the full process.
A worked example
Suppose sold comparables support an ARV of $240,000 after the planned renovation. Your repair worksheet currently says $35,000. You allow $12,000 for holding and transaction costs, and the buyer needs $36,000 of margin for the risk and work. The buyer's maximum price is $240,000 − $35,000 − $12,000 − $36,000 = $157,000. If a possible assignment fee is $10,000, the seller contract price ceiling is $147,000. These numbers are an illustration, not a quote to a seller.
Now change one assumption. A closer inspection raises repairs from $35,000 to $50,000. With everything else unchanged, the buyer's price ceiling falls to $142,000 and the seller contract ceiling to $132,000. The $15,000 difference is not a negotiating line; it is the consequence of a changed estimate. Show which repair items changed and check them. A formula is most useful when it helps you locate disagreement.
Run both versions in the MAO calculator. Use the ARV calculator to document comparable sales and the repair cost calculator to list scope. Save the assumptions with the lead so an acquisitions manager or buyer can review them. A number alone loses the reasoning that produced it.
The 70% rule and its limits
A common shortcut is MAO = 70% of ARV − repairs − assignment fee. On the $240,000 example, that is $168,000 − $35,000 − $10,000 = $123,000. The 70% factor rolls several cost and profit assumptions into one number. It can be a quick screen, but it does not tell you whether it fits a particular market, buyer, financing plan, repair scope or holding period. It also does not account clearly for separate transaction costs.
Compare the shortcut with the explicit example above: $123,000 versus $147,000. Neither is automatically “correct.” One uses a fixed factor; the other uses named assumptions. A buyer who plans a different exit may have different costs and margin needs. A small repair error can matter more than the percentage. Use the shortcut to decide what deserves closer review, then price a real offer with actual comparable sales, repair evidence and buyer feedback.
If someone tells you to use the same percentage on every property, ask what it includes. Does it account for financing, closing, taxes, utilities, selling costs and the buyer's required return? Is ARV supported by sales of similar finished houses? Could occupancy delay work? Keep the inputs separate until you can answer those questions. The glossary entry gives the short definition, while this page shows the calculation.
From the desk
On seller calls, I want to know what is factual before anybody argues over price. A seller can tell me a roof is new, but I still need to know when it was done and what other work is needed. Our call statistics describe our measured activity, not a universal offer ratio. The lesson from the desk is to keep the property note and the offer worksheet together so the next person can see where the number came from.
When a seller asks “What's your offer?,” explain which inputs you have checked and which you still need. When they say “That's too low,” compare assumptions. If the seller prefers a listing to seek a higher price, respect that choice. The cold calling script shows how to gather condition, timing and their number before running math.
What the formula does not decide
MAO does not decide whether a seller should accept, whether a contract is valid, whether a buyer can close or whether an assignment is allowed. Have a local real estate attorney review deal documents, and confirm closing mechanics with the title company. For the fee itself, read the assignment fee guide and use the assignment fee calculator. Those tools explain the arithmetic, while the professionals handle the actual transaction.