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What is a BMV

How to buy a house below market value?

Buying a property below market value can be intimidating especially the first time round, however looking and buying a house below market value doesn’t require expert intervention.


What is Below Market Value?

The Royal Institute of Chartered Surveyors define below market value as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in arm’s-length transaction after property marketing wherein the parties had each acted knowledgeably, prudently and without compulsion” .


It is the “without compulsion” is the key part of buying an apartment below market value.

For instant, why would you sell your property for less, if it is worth more? Above all, It is difficult to know if the property is cheaper because of the seller’s need to sell or if something is damaged or wrong with the property that you are unsure of.


Should I buy a property below market value (BMV)?

Yes, of course you should. When buying a property there is always going to be a risks. Just remember that no one willingly sells their property for below what it’s worth without a good reason. You need to ask yourself: “why is this seller prepared to sell this at this price?” and remember to be inquisitive, ask them questions.


Even if you feel you have been given a compelling reason you must still do your due diligence. Ask for evidence and be careful with what you believe. Especially with BMV properties, understand the area, do twice as much research as you would do normally and definitely get a more comprehensive survey completed.


When looking at BMV properties, taking the prices of surrounding properties, is not always a good thing, it is not a clear indicator of fair value. Those might be selling at that price for any number of reasons.


Whilst it is true that there are some companies who do genuinely support with helping you buy a property below market value, there are many who do not. And there are many who thought they bought a property below market value that woke up to a nightmare.


Be sure to always do your research and if possible, find the properties yourself. All of this said, the answer is yes, you would want it below market value but with a lot of extra diligence.

With that in mind let’s look at how we find properties that are BMV.


How Do I Find Properties Below Market Value?

The good news is that there are some really easy to follow and actionable steps you can take to find BMV properties. Firstly, search on RightMove or Zoopla by date in descending order.

Sellers which have had their property advertised on there for longer with no sale will, on average, be more open to lower offers than their asking price. You can find excellent deals this way.

Secondly, look for properties which are advertised poorly. We’re talking unflattering angles, poor lighting & just terrible photos. If the description is bad and the floor plan is missing as well, that’s a bonus. Most buyers will scroll past these properties, disregarding them.

Don’t be one of them.


An advertiser’s mistakes could be room for you to land yourself a great deal. The bottom line is: look past the photos and find the potential others might overlook.


Thirdly, consider if you’re open to doing any cosmetic flipping. These will be properties that look like they came straight out of the 80’s – properties painted with funky colours and perhaps houses which just need a good clean.


You’d be astounded by how many people these types of places turn away. If you’re prepared to invest a couple of thousands you can double and even triple your investment.


Negotiate

Do you know how to negotiate a property to buy it below market value? Once you’ve found a place you think might be a winner, it’s time for the fun part: the negotiation. It was once said that 90% of negotiation is just asking the question.


And when it comes to negotiation on a house question are certainly important. We will be launching a full article on how to negotiate in buying a home soon, but here’s a little bit to get you started.


When negotiating you always want your first offer to be declined. Always. Think about it, if your first offer is accepted, how do you know you were at the bottom of their range?

By getting the offer declined you know that you’re below what they will accept, and you would then look to increase your offer incrementally. Would this mean you should offer thirty pence on the pound? No.


The rule is that it needs to be low, but not so low so as to be seen as negotiating in bad faith – which will have the opposite effect on your goal. Make sure that you list the reasons why you’re offering that amount too.


The strongest negotiating position is ‘walk-away-ability’. The person who needs the deal to happen will always come away worse off as they will compromise more… since they need it to happen. Work out the market value of the property and what the maximum is that you’d like to pay for it.


Do not pay more than the lesser of these two numbers.


Final thoughts

If you are planning to rent it out, ensure that is cash flowing by making sure that there is rental demand for the property using RightMove and Spareroom.


You can even create a tester-add on the spare room to see what kind of responses you get ahead of investing in the property. Also, if the property does need renovations to make sure you understand the full cost of the repairs. A good rule of thumb is to over-estimate everything by 30%. So, can you buy a house below market value?


Many people will continue to buy homes below market value and make sound investments in doing so. When you do move, be sure to use our home setup service and save yourself up to nine hours of time. We contact all of your companies on your behalf and let them know that you’re moving.


You may also wish to move abroad, where buying a house below market value will be similar in some respects, but different in others.


And hopefully now you’re aware how to buy a house below market value. Remember, whichever country you’re moving to, the core negotiating and searching principles will be the same.

Why would a house become available below market value?

There is an urban myth that to purchase (or sell) a property well below its actual worth may be unethical (or even illegal) in some way. Buying a house below market value, with or without a mortgage, is generally a perfectly acceptable practice.


There are a number of genuine circumstances where this may occur, such as:

  • Sale from one family member to another

  • Property deliberately undervalued for a quick sale

  • Financial difficulties

  • Properties available through an auction

Buying a property from parents or family member

Probably the most common reason for houses to be bought and sold below market value is when it is between family members Parents who own a property portfolio can sell their children a house at a lower price, and get them on the property ladder easier.


Other benefits include saving money on estate agent's fees. However, there are tax considerations to take into account for such transactions along with other costs which would still apply regardless of who the buyer and seller are.


Property deliberately undervalued for a quick sale

There are a number of valid reasons why this situation may arise. It may be a recently separated couple needing to sell the marital home in order to finalise their divorce or property bequeathed to someone from a recently deceased relative needs to be sold before their inheritance tax affairs can be settled.


Financial difficulties

Another common occurrence, particularly in the current climate. Someone experiencing financial difficulties may need to sell their home to avoid an imminent repossession or bankruptcy, therefore, reducing the price below market value can entice prospective buyers.

Properties available through an auction

Generally, properties sold through an auction have what is called a ‘reserve price’ which is the minimum amount a seller is willing to accept. This price, if met, may be below the market value of the property, representing good value for the buyer.


Lenders who use auctions for selling repossessed properties may wish to simply achieve a figure covering all outstanding costs and monies owed which may amount to a valuation below the market value.



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