What is Below Market Value (BMV) property?

If you’re a property investor or an ordinary house hunter, who regularly participates in property-related discussion and follows property forums, you’ve most likely noticed that the term “BMV properties” has become a hot topic these days. You may have also seen that there’re both proponents and opponents of buying BMV properties. If you’re wondering what BMV properties are all about, this post would help you get a clear idea of them. We’ll also share our top tips on how to find such properties while avoiding unscrupulous people.

What is a BMV property?

BMV (Below Market Value) properties refer to properties that are sold at below the present market rate. Usually, these residential properties are made available for sale by agencies that specialise in BMV properties. The key reason for which investors, particularly inexperienced or new ones, and common homebuyers often become preoccupied with buying these properties is they can manage to get huge discounts from the actual market value. After all, who wouldn’t want to save thousands of pounds on a deal? But before you get drawn into buying BMV properties or even start searching them, there’re some essential things you must understand.

Why do BMV properties exist in the market?

Those, who’re unfamiliar with the property market, often think why would someone sell a property at a 20 to 30% discount? The short answer to this question is that circumstances differ from person to person and sometimes homeowners don’t have any option other than selling the property at below market value. Let’s take a quick look at the common reasons.

  • One of the main reasons behind the availability of BMV properties is family issues such as a divorcing couple planning to split the asset. Another reason could be the offspring of a deceased person trying to sell the property to get the proceeds as quickly as possible.
  • Property developers sometimes try to cover the development costs of new build properties early to be able to raise funds for new projects. However, developers usually sell them in chunks instead of individual units. Therefore, investing millions of pounds to buy multiple units may not be a feasible option for a common homebuyer.
  • If a mortgage company repossesses a house, it may try to recover the fund as quickly as possible by selling the property below the market value.
  • A homeowner may want to quickly sell his/her property below the market rate to manage financial difficulties. Relocating to another city within a strict deadline is also a potential reason for which many homeowners try to sell their houses below the market price to expedite the entire process.

Apart from these, properties that are unmortgageable or have structural issues might be sold at discounted prices. Basically, discounted prices and the speedy nature of the process are two key factors that drive the market of BMV properties.

How to find the right BMV properties?

When it comes to buying a BMV property, the most important thing that you must understand is a highly discounted price isn’t synonymous with the best deal. While buying such a property can help you save big on the price, it might invite potential hazards too. Go through and implement the following tips when searching for a BMV property.

  • Research the property thoroughly: The first thing you need to do is identifying the actual market value of the property that you’re looking at. Remember that the asking price may or may not equate to the property’s value. Additionally, you may never know that who came up with the asking price and how. Therefore, it might be appropriate, or it could be too high, or it could be surprisingly low. So, be sure to review the prices of similar properties, which have already been sold, in the same area over the last couple of years.
  • Check demand in the area: If you’re a property investor, you need to select a BMV property that can be conveniently sold or rented out. Needless to say, if there won’t be any potential buyer or tenant, it might take many years to recover your money. There’re several websites such as Zoopla that can help you obtain a clear understanding of the property demand in the area, where you’re trying to buy the BMV property.
  • Avoid buying in an area with a bad reputation: Of course, there’re risks with any investment but you’ve to minimise its likelihood. While it’s easy to get BMV properties at highly discounted prices in areas that are “up and coming” or have bad reputations, opting for one of them might prove to be a major mistake. if you still want to buy a BMV property in one of these areas, make sure that you’ve got some concrete pieces of evidence to justify your investment.
  • Contact a reputable property management company: Many property investors and homebuyers, who keep on searching for BMV properties, prefer not to use any “middle man” to source the properties. From a homebuyers viewpoint, it’s quite common to think that “why the company itself isn’t buying the property at such a discounted price?” There could be several reasons behind this. For instance, the deal isn’t as profitable as it’s being advertised or there could be hidden structural issues that are extremely hard to identify. But also there’re property management companies that make profits from sourcing BMV properties for homebuyers and don’t wish to become property developers or landlords.

Closing thoughts

Investing in BMV properties can be a great decision as long as things are done correctly. By partnering with a local property management company to identify potential BMV properties, you can save a lot of energy and time. Just be sure to check the credentials of the company and to implement the above tips to make a profitable investment.

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