What the rule actually says
Maximum allowable offer = (ARV x 0.70) - repair costs. On a $250,000 ARV house needing $30,000 of work, that is $145,000. Wholesalers subtract their fee too, so at a $10,000 fee the number becomes $135,000.
The 30% you leave behind is meant to cover holding costs, closing costs, selling costs and profit — all four, in one number, for every house, in every market.
Why one number cannot cover four costs
Holding costs depend on your money and your timeline. Selling costs depend on your commission structure and your state's closing customs. Profit depends on you. None of those are 30% of ARV, and they are certainly not all 30% of ARV at the same time.
On a house needing very little work, the flat haircut is far more than your real costs, so the rule tells you to underbid a deal you would have been happy with. On a heavy rehab in a slow market, 30% is not enough, so the rule blesses a deal that loses money.
The deal it throws away every week
A seller wants $100,000. The 70% rule says $80,000. Both sides are certain the other is unreasonable and everybody walks.
Now price the same house for a retail buyer using financing. That buyer pays near market value for the repaired home, so the deal often carries $95,000 to the seller and still clears a real fee. Nothing about the house changed. The assumption about the buyer changed.
What to use instead
Keep the rule as a ten-second screen when you are sorting a list. Never use it as an offer. For an offer, build the number from the actual line items:
Total expenses = commissions + repairs + concession credit + closing costs. Maximum allowable offer = projected sold price - total expenses - your profit goal. Negotiate off asking = asking price - your maximum allowable offer.
That last line is the one to bring to a seller conversation, because it tells you exactly how far apart you are before you open your mouth.
Two ways to check yourself
Run the 70% rule so you know what your competition will offer, then run the full numbers so you know what you can offer. When the two disagree by $40,000, you have found the reason somebody else lost that contract and you did not.
Both calculators are free and need no account.