It's not a swindle. However, that's not precisely what the offer was. (I also offer that service as an investor--see http://www.WeBuyFairfaxHouses.com
Here's how it works: The investor starts from the after-repair value (the fixed up value, if fix-up is needed) of a property. That value is then reduced to about 65%-70%. So, just to use round numbers, if the fixed-up value is $100,000, it's dropped down to $65,000-$70,000. Then repair expenses are subtracted. Let's say the home needs almost no repairs--maybe just paint and carpet--about $5,000. Subtract that, and you come up with $60,000-$65,000. That's what the investor calls the "MAO" or "maximum allowable offer." That's the most the investor will pay for the home. He may offer less.
To take your specific example, the investor would not base his calculations off an appraised value, unless the appraisal were very recent and done for the right reason. (Example: appraisals for refinancings are no good; they're not done for the right reason.) Instead, the investor would have a Realtor run comps, and base the ARV on the comps. And if you meant "assessment" rather than appraisal, an investor would never, never base an offer on a tax assessment. Never.
I doubt the investor said that 80% of the appraisal "is the best price you can get in that area." It's easy enough for you to go to a Realtor and ask how much the property might sell for. In other words, what are the comps? An investor might say that 80% of some figure is the most he could offer. I'd be glad to tell someone that, as an investor, the most I could pay would be 70% of ARV. I'd also be glad to tell the seller that if he didn't want or have to sell immediately, I'd be glad to list his property and sell it for close to 100% of ARV.
It really comes down to how quickly you want to sell, and what condition the home is in. As an investor, I'll buy the home in as-is condition. (I'll do that because I'll subtract the necessary fix-ups from my base offer.) Some sellers just want to sell their homes. They don't want to put in a lot of time, effort, and money fixing it up.
To address a few points below: One comment asks: "Did they provide a Comparative Market Analysis?" If they're really claiming that the best price you could get (from anyone) would be 80% of an appraisal, then it might make sense. But, again, most investors wouldn't base an offer on an appraisal, regardless of who did it. And most investors are honest enough to admit that you can get more by listing with a Realtor. I really suspect the investor was saying that 80% of some figure was the most they could offer. And there'd be no need for a CMA in that case. When YOU bought your home, did YOU present the seller with a CMA to justify your offer? I doubt it. You made an offer that worked for you and figured, correctly, that if the seller liked the number, he'd accept. If he didn't like it, he'd reject it or counter.
Look: You can get more by listing with a Realtor. Let's say your home is worth $120,000. If you list with a Realtor, after commissions, other expenses, and stuff, you might net $110,000. Depending on how healthy the real estate market is where you are, a properly priced home might take 45-100 days or so to sell. If you sell to a "I Buy Houses" company, you're likely to net about $77,000, depending on your home's condition. But you'll be able to sell in a week or two in as-is condition, not 2-3 months.
It's not a swindle. It's just a different business model providing a different mix of services to the seller.
Hope that helps.