What is a BMV deal, and does it really exist?
If you are in property for any length of time you might ask the question ‘What is a BMV deal?’
BMV is an abbreviation for the term Below Market Value and typically relates to any deal or property that is available for below the normal market valuation.
What is a normal market deal?
A normal market deal can be as small as a road or as big as a postcode area. It can be a location, or a home type (e.g. a 3-bed semi with a garden. Or, an HMO).
Knowing the average market price for a particular property type or area enables you to spot what is a BMV deal or opportunity when it arises. You can then buy well with this knowledge.
Why would someone sell BMV?
There are many reasons why someone would be prepared to accept a lower than average price for their property. For example, they could be:
- A new build developer needing a cash injection so they can start on the next phase of their development
- Someone who is facing repossession. (As we reported in a recent blog, repossessions are on the rise)
- A vendor whose chain has broken but still wants to sell, so they don’t lose the house they are buying. (The latest stats show that around 22.39% of sales fell through before completion in the third quarter of this year. 40% of these lost sales were due to the buyer changing their mind)
- A landlord keen to sell his property which also has a tenant in-situ
- Moving away for work or divorcing. Or, a probate property is involved and the vendors are eager to sell as quickly as possible.
In cases such as these where the seller is motivated, there may be opportunities to buy at a price BMV.
How to go below market value ?
As a property investor, you are in the position of both being flexible and able to move quickly. This is an attractive proposition to a motivated vendor who may be prepared to go BMV. Here’s why:
- There is no chain, so you are in the position of being a cash (or financed) buyer, making for a quicker process, you can provide speed.
- If you can provide security in a transaction because you are investing and taking on the problems, the vendor can be reassured that you can deal with and solve the problems for the vendor and the property.
- Look for ways to improve the property, you can renovate un-mortgageable (for private residential borrowers) but you could use short term and development finance products or bridging to buy and fix up.
- You can buy multiple properties in one deal, at a discount and below market value.
- Pay the seller’s fees to help them overcome cash flow problems.
In a nutshell, you are providing less stress and a workable solution.
Look for motivated sellers
Find out exactly why are they selling the property at BMV and offer them the solution. This could be a quick, cash sale, perhaps, or the chance for someone about to lose their home to repossession to minimise their losses in court and offer them a better solution and sale than an eviction process might offer. But once you do, you can find the best way to resolve their issue where everybody wins.
How do we find BMV deals?
We take a multi-pronged approach to finding BMV deals. We talk to estate agents, network, use property portals, and do leaflet drops and local advertising to locate motivated sellers.
As property investors, we can solve more problems
Because a property investor we can use lots of creative ways to solve property problems for sellers, we can be flexible. We can structure lots of different solutions that suit the seller’s circumstances. We provide creative solutions.
So, if we can be creative and solve problems then, yes, BMV exists – and you can be part of it too
As always, of course, do your due diligence. So, if you are buying in a market (e.g. postcode, street etc.) you are unfamiliar with, then do your research before even contemplating making an offer.
Where there is no apparent reason for the property to be BMV – especially if there is not a motivated seller – beware. Just because it is promoted as BMV doesn’t necessarily mean it really is at a discounted price. Maybe the price was too high before. What is a BMV deal for you may not be for others.
Note: We discuss how to find BMV deals and what to consider before buying, in our FREE Property Strategy Sessions in our Boardroom, click here to join us.