If you are a landlord or a property investor, an investment opportunity you may wish to pursue is buying property below fair value. These are properties that have often been on the market for some time or are priced undervalued due to the sellers searching for a quick sale.
But what is bmv in property? How do you find a below-market value home? And is it worth it?
In this article, we answer all these questions and more, as we take a deep dive into the world of BMV property.
Looking for a quick answer? Check out our interactive menu below!
- What does BMV mean in property?
- Are you allowed to sell a property below market value?
- Why sell property below market value?
- Can I sell my house to my son or daughter for less than market value UK?
- How do you find below market value properties?
- How to buy a house under market price?
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What does BMV mean in property?
If a property is advertised as BMV it means that it is below market value. These properties are typically residential however any property type can be sold BMV. Typically these properties are sold BMV because their sellers need to sell their properties fast, such as if they are divorcing or facing reposession.
How can you identify a BMV property?
If you are looking for property less than market value, there are several ways that you can check…
- Look at what similar houses have sold for in the area in the recent months
- Find a professional surveyor who can undertake an evaluation report for you
- Call around the area you are interested in posing as a buyer and a seller to get an idea of how much properties can sell for
How can I purchase a BMV property?
If you are looking for a property bmv, there are several ways you can go about it. These include:
- Bridging loans
- Joint venture partnerships
- Mortgage Financing
Are you allowed to sell a property below market value?
Yes, people can sell their property for less than market value. Whilst people will typically sell their homes in the hopes of making a profit, sometimes people decide to sell for less than market value. You can sell the property below fair value as long as the property sells for the least amount that is still outstanding on the mortgage, in order to pay off the loan.
If this is not feasible, then you may want to take out a loan in order to cover the amount that is owed before selling but you must be sure to have the means to pay it back with interest during the allotted time.
Another route you may want to explore is transferring your mortgage to the property’s new owners as part of the sale. However, this process can be complex and the new owners will need to pass all of the checks required by the provider.
Why sell property below market value?
There are a number of reasons why someone may be selling house for less than market value. Below, we take a closer look into some of the reasons why a seller may put their property on the market for less than its value on the market.
Family and friends – Some people may decide to sell their property less than market value if they are selling to a friend or a family member, however, this decision can come with tax implications that will need to be considered.
Disposal – If a seller is looking to dispose of their property quickly, then they may sell for below fair value in order to speed the sale up. This could be due to repossession, financial hardship, divorce, or just wanting a fast sale.
Not enough interest – If a property is not performing as expected in the property market, then a seller may decide to lower the asking price as a way to attract potential customers.
Competition – If the seller is selling a home in an area where there are other similar properties on the market, then they may lower the price in order to compete against the properties.
What to consider when selling a house below market value
If you decide you wish to sell a house under market value, there are a few things you will need to consider. Below we take a closer look at some of the implications you may have to face if you do decide to sell below the market value of the property:
If you are in the unfortunate position of needing to sell due to financial hardship, then you may consider doing s short sale. This is the process of selling the property for less than what you owe on your mortgage.
This sale type is often less common in the UK, however, they do occur. If you do decide to have a short sale for your property, you must inform your lender of your plans and complete the mortgage agreement.
Your lender may request you send them proof of hardship or you may be unable to get the sale approved by the bank. As is the case with any transaction, you should be sure to get the agreement put into writing and ensure all appropriate contracts are signed to avoid any issues further down the line.
If you are struggling to sell your property on the open market and are considering selling below market value as a way to sell quicker, you may want to have another look at your valuation. It may be a case that your property has been incorrectly valued.
Estate agents could either over or undervalue your property which can spell disaster when you are trying to sell. An estate agent may overvalue your property in the hopes of winning your custom, or undervalue it in the hopes of securing you a quick sale. Either way, an over or undervalued property can put potential buyers off, as they can be left to wonder what the catch may be.
You may also want to read into the tax laws surrounding a property sale, such as Capital Gains Tax, gift tax, or inheritance tax. By reading up on the different laws and legislations, you will be able to avoid any legal ramifications later down the selling process.
Can I sell my house to my son or daughter for less than market value UK?
Yes, you can! Selling a house under market value is generally easier if there is no mortgage involved, but you can sell your house to whoever you want. However, there are still hoops you will need to jump through, regardless of who you sell to.
You are able to sell your home to a family member for as little as £1, however, it can be no less than this. This is because cash needs to exchange hands in order for a legal contract sale to be in place.
Whilst you can sell your property to a family member for as little as £1, you should bear in mind that the relative who is buying below market value must have a mortgage in place. They may have to take their time and shop around for lenders, as some tend to avoid dealing with transactions that take place between family members.
You should also remember that if you sell a house below its fair value to a family member, the difference between its value and the price paid will amount to a “gift” in the eyes of HMRC. This means that if you die within 7 years of the sale and it exceeds the annual exemption, then Inheritance Tax will be payable on that difference.
Pros and cons of purchasing property for less than market price
As with any purchasing decision, there are pros and cons that come with buying your next investment property for less than the sale price:
- Instant equity boost
- An acceleration on returns
- Reduced risk
- An increase in profit potential
- Access to untapped opportunities
- Hidden issues with the property
- Title issues
- Market conditions
- Cash flow issues
How do you find below market value properties?
If you are searching for below market property deals, there are plenty of avenues for you to explore. You can find BMV properties at:
- Property portals
- Estate agents who are selling on behalf of homeowners looking for a quick sale
Below we take a closer look at some of the most popular sourcing methods for BMV property:
One such way you can find good less than market value deals is by searching property portals such as Zoopla and Rightmove. You should filter the results in date and order them in descending order. You should be on the lookout for buyers who have been on the market for a while, as they will be more open to accepting an offer that is below the asking price.
The advantage to finding a property this way is the ability to refine your search to the areas, budget or property type you are looking for. You are also able to use advanced features that these property portals bring with them, such as advanced search. This feature shows you properties that are currently ‘under offer’ or being sold ‘SSTC’. Whilst these investment properties may currently be in the process of being bought, these sales can often fall through, so it is important to keep an eye out to help get the best property deals.
Another route you may wish to explore when looking for your next below market property investment is to reach out and network with local estate agents. By reaching out and keeping in touch with several different local estate agents and alerting them to the property that you are looking for, you are able to increase your chances of finding a property that meets your requirements.
The best way to do this is to reach out regularly, enquire about properties that have been on the property market for a few months and express interest in any property sales that may have fallen through in recent weeks.
Another great way to find your next property deal is to search through a property auction. Property auctions are a popular choice as all winning bids are legally binding once the gavel falls, meaning it’s a great way for motivated buyers to find a good deal. The properties sold there are often bmv due to structural issues, repossession or other issues, however, if you don’t mind doing some renovation work, it could be the ideal place for you.
It is important to keep up to date with local auctions in order to source some great property deals.
If you are on the lookout for a below-fair-value deal, you may want to try targeted advertising and marketing. This is a great method for attracting motivated sellers, as you utilise targeted adverts and marketing in the areas you wish to purchase. All you need to do is use newspaper ads, flyers, online listings or direct mail to advertise that you wish to purchase. By describing the properties you are looking for, as well as your ability to purchase and finalise the sale quickly, you can find plenty of good BMV deals.
How to buy a house under market price?
If you are looking to invest in property, then you may be wondering how you can purchase a house under market price. Below we take a closer look at the steps involved in purchasing a property for below selling price.
Once you have found a below market property that you are interested in, the first thing you will need to look at is whether you will be able to get a good return on investment. You should make sure that it is in an area with a high housing demand and you will be able to rent it out or flip it for a profit.
An important part of purchasing BMV property is ensuring that you do your due diligence. This means visiting the property and checking out the local area. You need to have evidence of the property’s profitability, so be sure to check other property prices in the area, as well as rental prices. It may be a good idea to hire a solicitor at this point in the process before you commit to a contract.
Whilst it can be easy to jump at the first house less than market value that you find, you should look around and compare your property to two to three others and weigh up each of their qualities, potential ROI and rental yields and decide which property is the one you wish to purchase.
After you have chosen the property you wish to purchase, it’s time to go in with your offer. You should look to be making an offer that is approximately 10-20% below the asking price. It is critical to ensure that the offer is subject to a RIC surveyor’s valuation who is qualified to do residential valuations.
Once your offer has been accepted, you should send in your RICsn valuer. If the property is in poor condition, you should have a building survey with a valuation. You are then able to instruct your solicitor to purchase the property.
This covers everything you need to know about buying properties below market value. If you have any questions, queries, or insight into the matter, feel free to get in touch.