How to Calculate ARV & MAO (the Wholesaler's Offer Formula)

The entire wholesale business depends on one number: the gap between what a seller will accept and what a cash buyer will pay. That gap lives in three places—After Repair Value (ARV), repair estimates, and Maximum Allowable Offer (MAO). Get the math wrong and you kill the deal or lose money; get it right and every offer is defensible to both the seller and your cash buyer.

What ARV Means

ARV is the market value of the property after it has been fully renovated to market standards in your area. It is not a guess, and it is not the Zillow Zestimate.

ARV is built from comparable sales — recent, actual sales of similar properties in the same area. A valid comp must meet these criteria:

• Location: same zip code or within 0.5–1 mile (walking distance to comps is critical)
• Similarity: same number of bedrooms, bathrooms, and square footage (±200 sqft acceptable)
• Timing: sold within the last 90 days (fresher data = more accurate)
• Condition: the comp sold in after-repair condition (not a fixer or foreclosure)

If you pull comps that sold 6 months ago in a different neighborhood, your ARV will be unreliable. Most wholesalers pull 3–5 solid comps, add them up, divide by count, and use the average as ARV. If the comps range from $185k to $215k, your ARV is approximately $200k.

How to Pull Comps

Pulling accurate comps is a skill that gets faster with repetition. Here’s the workflow:

1. Enter the property address into MLS or Zillow.
2. Filter by sold status (not listed, not pending—actually closed).
3. Set the radius to 0.5–1 mile and the date range to 90 days.
4. Match bed/bath count. If your property is a 3-bed/2-bath, look for 3-bed/2-bath comps, not 4-bed.
5. Note the sale price and sale date. Write them down or screenshot.
6. Average them. Add the sale prices, divide by the number of comps.
7. Sanity-check against market knowledge. Does the average feel right for the area? If it’s a beach neighborhood and all your comps sold for $250k+, a $150k comp is an outlier—investigate before including it.

If you have fewer than 3 solid comps, keep searching. A $200k ARV built on 5 solid comps is infinitely better than a $200k ARV built on one comp and a Zillow guess.

The 70% Rule (and When to Flex It)

The 70% rule is the universal wholesaling formula for maximum allowable offer. It says:

MAO = (ARV × 0.70) − Repairs − Assignment Fee

The 70% factor accounts for the cash buyer’s profit margin, carrying costs, and contingency. Here’s the math:

• ARV is 100% of value (fully renovated market price).
• 70% is the purchase price the cash buyer is willing to pay.
• 30% is left for the buyer: repairs (if any remaining), profit (typically 15–20%), and carrying/holding costs.

Example: ARV $200k × 70% = $140k maximum the buyer will pay. If repairs are $45k and your assignment fee is $10k, the MAO to the seller is $85k. That leaves the buyer $55k of headroom ($140k − $85k = $55k) for their profit and risk.

The 70% rule is not a law of physics. It is a rule of thumb built on market experience. Here’s when you flex it:

• 70% is baseline. Use it for typical wholesales in normal markets.
• 75–80% in hot markets: if your market is booming and cash buyers are fighting over inventory, you might offer 75–78% of ARV because the buyer’s margin compresses but their deal certainty increases.
• 60–65% in distressed markets: if you are wholesaling foundation issues, fire damage, or severe structural problems, the buyer’s risk is higher, so they demand 60–65% to account for unknown costs. Your MAO is lower, but so is the seller’s (motivated sellers often accept lower because they can’t carry the property).

Start with 70%. If deals are hard to find contracts or end buyers are passive, stay at 70%. If you are losing deals to competitors, test 72–75% and see if you get more contracts. If you’re sitting on inventory you can’t assign, drop to 65% because your MAO estimate was too high.

How to Estimate Repairs

Repair estimation is where most wholesalers fail. They guess or low-ball, then face sticker shock when the end buyer walks or demands a price cut at closing.

Repair estimate includes every major system and visible condition issue:

• Roof: roof inspection, reroof (if needed), or repair
• HVAC: furnace, air conditioning, water heater
• Plumbing: main line, interior lines, sewer connection
• Electrical: panel, wiring (if knob-and-tube or aluminum is present)
• Foundation: settling, cracks, water intrusion, or structural repair
• Kitchen: cabinet, counters, appliances, backsplash
• Bathrooms: flooring, tile, fixtures, grout
• Flooring: throughout (carpet, vinyl, hardwood)
• Exterior: roof, siding, windows, doors, landscaping, driveway
• Paint: interior and exterior
• Permits: local requirements for major work

Before you walk the property (estimate): Use a price-per-square-foot guide:

• Light cosmetic (paint, flooring, minor updates): $15–$25/sqft
• Moderate renovation (kitchen, bathrooms, new roof or HVAC): $40–$60/sqft
• Full gut renovation (everything): $60–$100+/sqft

If your property is 2,000 sqft and needs moderate renovation, estimate $40 × 2,000 = $80k.

After you walk the property (detailed estimate): Break down by category and get prices:

• Roof replacement: $8,000–$15,000
• HVAC system: $5,000–$12,000
• Plumbing updates: $3,000–$8,000
• Electrical panel upgrade: $2,000–$5,000
• Kitchen renovation: $15,000–$40,000
• Bathroom renovation: $8,000–$20,000 each
• Flooring: $3,000–$12,000
• Paint (interior + exterior): $2,000–$5,000
• Exterior/landscaping: $2,000–$8,000

Add line items relevant to this property. A fire-damaged house won’t need a roof replacement but will need interior rebuilds and HVAC decontamination. A probate property might just need cosmetic updates, not structural work.

Common repair-estimate mistakes:

1. Ignoring roof + HVAC. These are the two most expensive line items. A roof that looks OK but is 20 years old will need replacement soon. If you skip it in the estimate and the buyer finds out, they will demand a price cut or walk.
2. Underestimating foundation issues. Any cracking, bowing, or water intrusion in the basement is a red flag. Get a structural engineer’s estimate before you sign the contract, or pad the repair estimate significantly.
3. Forgetting permits. If major systems are replaced, the city requires permits and inspections. Permits add 10–20% to the cost of the work. Budget for it.
4. Not segmenting by occupancy. A vacant property can be renovated faster (no tenant to relocate, 24-hour work windows). An occupied property with a tenant moving out will take longer. Vacant = lower carrying costs.

The MAO Formula

Now tie it all together.

Maximum Allowable Offer = (ARV × 0.70) − Repair Costs − Assignment Fee

This is your formula. Everything else is context.

Example:

• ARV: $200,000 (pulled from 4 comps, average)
• Repairs: $45,000 (contractor walkthrough, itemized)
• Assignment fee: $10,000 (your target fee for this deal)
• Calculation: ($200,000 × 0.70) − $45,000 − $10,000 = $95,000 MAO

Your MAO to the seller is $95k. That is the maximum you will offer. It is not your opening offer—start at $85k ($95k − 10%) to leave room for negotiation.

The seller counters at $100k (they always do). You hold at $92k. You meet at $90k. You are now $5k under MAO, which gives you margin if repairs run a bit over estimate or the end buyer is slightly softer on price.

The math reconciles:

• Seller gets: $90,000
• You get (assignment fee): ~$10,000 (depends on end buyer price)
• End buyer pays: $140,000 (the 70% of ARV)
• End buyer margin: $50,000 ($140k − $90k) to cover repairs ($45k) + profit ($5k)

This is tight but realistic. In hotter markets, if end buyers are competitive, they may pay more, so your assignment fee can be larger or repairs can be lower. The 70% rule is your guardrail, not a promise.

Common Mistakes

1. Using Zillow Zestimate as ARV. Your AVM will be wrong. Pulled comps are the only reliable method. If you can’t find 3 solid comps, the property is in an unusual area—that’s a signal to be cautious, not an excuse to use an algorithm’s guess. Pass on the deal or spend more time searching for comps.

2. Ignoring foundation, roof, and HVAC in repair estimates. These are the big-ticket, non-negotiable items. If the house has an old roof, assume it needs replacement ($10k–$15k). If the foundation has hairline cracks, get a structural engineer report ($200–$500, money well spent). Do not pass on these because “the property looks OK.”

3. Not netting out the assignment fee. The MAO includes your assignment fee as a line-item deduction. If you don’t subtract it, your MAO is too high. The seller will think you’re offering more than you are, and the end buyer will balk when they realize the deal doesn’t have margin.

4. Offering at MAO instead of 10–20% below. Your MAO is a ceiling, not a starting bid. Offer $85k on a $95k MAO. Let the negotiation bring it up. A motivated seller will often meet you at $90k–$93k. An unmotivated seller will hold firm at $100k+—that’s a signal to walk; they’re not motivated enough for a wholesale.

5. Not adjusting for market conditions. In a buyer’s market (inventory is high, demand is low), cash buyers have options. Your 70% might need to be 65% to get a deal assigned. In a seller’s market (inventory is tight, demand is hot), cash buyers compete, and you might get 75% or even get the deal assigned above MAO because competition for the property is high.

6. Not accounting for occupancy or tenant situation. A vacant house can be renovated faster and cheaper (no utilities, no tenant to manage). An occupied house with a tenant requires the tenant’s move-out coordination or re-tenanting costs. If the property is inherited (probate), title clearing may take time. A rental property with problem tenants may require eviction—that’s an added cost and delay. Ask about occupancy status in your setter conversation. It affects both your repair estimate and your timeline to assign.

The MAO Formula in Action

Frequently Asked Questions

What if I can’t find 3 good comps?

This is a yellow flag. It usually means the property is in an unusual location, a new development, or a market where sales are sparse. Your options:

1. Expand the search radius from 0.5 miles to 1 mile. Quality comps at 1 mile are better than no comps.
2. Adjust for differences. If a comp is the same house but 200 sqft smaller, add $20/sqft to its price to normalize it. If it sold 4 months ago instead of 2, adjust downward ~0.5–1% per month (market appreciation/depreciation).
3. Ask your end buyer. A cash buyer who operates in this area will have a sense of value. Use their input to validate or adjust your ARV.
4. Pass on the deal. If you cannot establish a defensible ARV, you cannot make a defensible offer. Walk. Better to skip one deal than to overpay and get stuck with an unassignable contract.

Should I always use 70%, or can I go higher?

You can go higher, but understand what you are giving up:

• 75% ARV: Your MAO is higher, so you can offer sellers more. But cash buyers have less margin. Use this when cash buyers are desperate for inventory or when the property is in high demand.
• 65% ARV: Your MAO is lower, so you offer sellers less. But cash buyers have more margin for surprises. Use this in down markets or on problem properties (structural, fire damage, etc.).

The 70% rule is the middle ground. It works in average market conditions. In extremes (hot market, cold market, distressed property), adjust.

How do I know if my repair estimate is accurate before I see the property?

You don’t—and that’s why the contract includes an inspection contingency (usually 5–10 days). You offer MAO based on your pre-walk estimate (price-per-sqft or visual exterior inspection). After you have physical access, you get a detailed estimate from a contractor. If repairs are higher than estimated, you can renegotiate with the seller or walk if it breaks the deal math.

The inspection contingency is your safety valve. Use it.

What if the seller won’t budge below market price?

The seller is not motivated by your standard (time, financial pressure, or speed). They believe the market will give them more, or they don’t need to sell quickly. Your job: uncover their real motivation.

Ask: “If you were to sell, what’s the ideal timeline for you?” or “Is there something that would make a faster sale attractive?” If they say “I’m not in a rush” or “I’ll just list it with an agent,” they’re not a wholesale candidate. Move on. Motivated sellers have pain, not just inventory. No pain, no discount.

Can I assign my contract for more than my estimated fee?

Yes. Your assignment fee is what the end buyer is willing to pay above what the seller receives. If you contract at $90k and the end buyer offers $105k, your fee is $15k. If the end buyer offers $120k (because they have a much better repair estimate or they see higher ARV), your fee could be $30k.

The constraint is the end buyer’s math. As long as their margin math works at their purchase price, they will close. Your fee is whatever they are willing to pay minus what you paid the seller.

Should I double-close if I want to keep the assignment fee private?

A double-close is when you close on the property (seller → you), then immediately resell it (you → end buyer) on the same day. The end buyer doesn’t see your assignment fee; they only see the final purchase price.

Double-closes are more complex and carry two sets of closing costs (yours and the end buyer’s). Use a double-close only if:

1. The seller is specifically opposed to knowing your fee (rare, and a red flag that you underpaid them).
2. The end buyer demands anonymity (unlikely; most cash buyers know wholesalers exist and expect a fee).

For most deals, a simple assignment is cleaner, cheaper, and transparent to all parties. The seller knows the end buyer is paying more—that’s how wholesale works.

This guide is educational and is not financial, tax, legal, or investment advice. Programs, lender policies, and tax rules change. Consult a licensed attorney, CPA, and lender before acting.