Below Market Value (BMV) Property: What is it? How to source it? How best to buy it?
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Ranked #22,649 in How-To, #236,090 overall
Firstly, How Do You Define A Property That Is Below Market Value?
BMV, the abbreviation for "Below Market Value" is a term many will be hearing more and more often. This lens aims to clarify its meanings and the causes of its popularity.
Well it's certainly not difficult to ascertain that BMV property in simply property that is sold below True Market Value. So what is 'True Market Value'? True Market Value (TMV) is the "estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion" (source: Red Book: RICS Appraisal and Valuations Standards)
Interestingly it is impossible to tell precisely what the market value of a property is at any particular time. The best idea can only really be formulated through a comparison of what other properties in the area are selling for. But this again can cause problems in that the asking price of a property may not reflect the market value. Simply put, getting a discount on the asking price is not the same as buying a property at BMV.
Buying BMV is becoming popular for many reasons. Buying a property BMV often ensures that a deal 'stacks up' if you're looking to rent the property out. It can also secure a quick and modest profit through 'flipping' or re-selling the property soon after the purchase and it has also become increasingly common to re-structure a BMV property into a 'low' or 'no money down' investment deal.
BMV is a term you will find used most by property investors. Why? Well often enough for a property to be deemed a sound investment opportunity it has to meet certain criteria unlike those you are looking for when simply looking for a property for yourself to reside in. Property investors are looking to purchase a property to rent, or purchase the property to sell. So from an investment point of view a property that is bought BMV effectively locks in instant equity which can be turned into profit through purchasing to rent, as long term investment strategy, or purchasing to sell as a short term investment strategy.
Well it's certainly not difficult to ascertain that BMV property in simply property that is sold below True Market Value. So what is 'True Market Value'? True Market Value (TMV) is the "estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion" (source: Red Book: RICS Appraisal and Valuations Standards)
Interestingly it is impossible to tell precisely what the market value of a property is at any particular time. The best idea can only really be formulated through a comparison of what other properties in the area are selling for. But this again can cause problems in that the asking price of a property may not reflect the market value. Simply put, getting a discount on the asking price is not the same as buying a property at BMV.
Buying BMV is becoming popular for many reasons. Buying a property BMV often ensures that a deal 'stacks up' if you're looking to rent the property out. It can also secure a quick and modest profit through 'flipping' or re-selling the property soon after the purchase and it has also become increasingly common to re-structure a BMV property into a 'low' or 'no money down' investment deal.
BMV is a term you will find used most by property investors. Why? Well often enough for a property to be deemed a sound investment opportunity it has to meet certain criteria unlike those you are looking for when simply looking for a property for yourself to reside in. Property investors are looking to purchase a property to rent, or purchase the property to sell. So from an investment point of view a property that is bought BMV effectively locks in instant equity which can be turned into profit through purchasing to rent, as long term investment strategy, or purchasing to sell as a short term investment strategy.
What Causes People to Sell BMV?
We know the reasons for people wanting to buy property BMV, there obvious, but what can motivate someone to sell BMV. To some people these motivations are obvious ...to others they are not.Reasons can include:
- Divorce
- Loss of a Loved One
- Emigration
- Relocation
- Repairs too overwhelming to undertake
- Deals from developers looking to improve off plan sales
- To avoid breaking a chain or losing a dream property
- A house failing to achieve offers or viewings
- Debts
- Imminent Repossession
Methods of Sourcing BMV Property
So we've covered why people would buy and why people would sell. Its all fair enough but what if you were a buyer...How do you find these 'motivated sellers'?Well the most common methods people use for generating BMV leads include:
Classified Ads- An ad in the paper explaining that you will pay 'cash for a quick sale'.
Flyer distribution- a leaflet drop around the area your looking to invest in, farming an area just like estate agents.
Contacting professionals - Networking with doctors, accountants, solicitors etc can help in finding leads.
Befriending the postman - A little local information can go a long way to finding out which people are 'motivated sellers'.
The internet - You can reach more people more quickly at less cost making the internet a great resource.
Look for properties that have been on the market for a long time - These sellers could be running out of time and need to sell up fast.
Looking for TWO For-sale boards out front from competing agents - A clear sign that the property is having problems attracting offers and thus owners will be getting impatient to sell (Also interestingly when Estate Agents are competing to sell the same property they can often but little effort into making the sale. Why? The understand the risk in committing a lot of man hours in trying to sell the property only to lose the commission to the other agent when it finally sells).
Distressed and tired looking properties - The owners may want to move on as the work is too overwhelming to take on or isn't attracting offers or viewings.
And of course there is always the option to buy BMV leads from companies that source them. Some even only charge fees for these leads apon completion of a BMV deal.
5 Negotiating Tips for Buying BMV
Provided by Jodie Hughes of Buy To Let Investors Ltd
The first thing you need to remember when negotiating a BMV deal and you're buying to let is, first and foremost, treat it like a business deal.1. When you begin negotiating BMV property the point to keep at the forefront of your mind is that "The seller needs you, more then you need them". If they didn't, then they are not a motivated seller and you shouldn't be in negotiations with them in the first place.
2. Leave your emotions at the door. If you become emotionally attached to a negotiation then chances are you will end up increasing your offer and forgetting the vital figure of your maximum offer. Always go in to a negotiation with a final offer in your head...and stick to it.
3. Never ever offer the asking price. By offering the asking price you give the vendor the impression that their asking price is too low and perhaps could get more. In these instances you may find the vendor increasing their asking price just before exchange. Savvy investors will always go into a negotiation with a low offer. It will filter out the time wasters and the worst that can happen is they won't accept the offer.
4. Always walk away. Remember there are always other deals to be found. You do not have to complete on every negotiation. If you are buying nearly every property you view, then chances are you are offering too much. There is a strict ratio of 1:10 in BMV investing. Every 10 properties you view you should aim to purchase one. And make it a good one!
5. Time is on your side. The longer the negotiations go on the more likely the vendor will get emotionally attached. If the negotiations have taken place over 2 weeks the investor is more likely to accept a lower offer then begin the whole process again. In the long run it will cost the vendor more money as well as time in mortgage fees and estate agent fees so it makes sense for them to accept the lower offer and move on.
Jodie Hughes is the Sales Manager of 'Buy To Let Investors Ltd', A small yet very successful Property Investment Company that formed when a group of like-minded investors realised they could command great discounts on property deals through their combined purchasing power. Find out more about BMV Property Investment on their website.
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Well Thats The Basics Covered
Hope you found this lens useful
This lens aimed to give whoever wanted to know a grounding in what BMV is. If you've found this lens in anyway helpful please leave a comment or vote for it. If you want to know more about other property jargon terms check out some of my other lens including my latest one on No Money Down property deals.If you want to know more about BMV property then a suggest clicking here to get a FREE BMV Property Report. It is an extremely useful, up-to-date resource and its completely FREE and comes highly recommended.
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Disclaimer From The Author
Please note the information in this lens is intended as general guidance only for individual readers and does NOT constitute investment or other professional advice. I have endeavoured to keep the information up-to-date and correct, but make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability of the information within this lens. Any reliance you place on such information is therefore strictly at your own risk. I therefore recommend that for investment or other professional advice you consult a suitably qualified professional adviser.
by The_Property_Expert
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