Buying a property below market value is the holy grail in the property.
And if you have ever wondered: “how to buy a house below market value?” you’re in the right place.
Getting a house below market value doesn’t require expert intervention.
It also doesn’t require decades of property experience. But how do we define ‘Below Market Value’ in the first place? And, importantly, how do you get a great deal on your property?
These are the right questions to ask. Therefore, we will cover everything you need to know to secure a property below market value. Let’s get started.
Let’s start with a definition. The Royal Institute of Chartered Surveyors (RICS) defines 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 instance, if someone wasn’t compelled, why would anyone sell their property for less than it is worth? Above all, it is also worth mentioning that this is where buying a property BMV is difficult. For instance, it is difficult to know if the property is cheaper because of the seller’s need to sell or if something that you’re not aware of is wrong with the place – as we will shortly see.
Furthermore, you might hear some people say things like “there is no such thing as ‘below market value'”. Some people make this argument since if someone sold it for that amount, that amount, therefore, is the market value of that property.
What we mean to say then, is that we want to buy a house which if we were to sell again in the same market we would reasonably expect to achieve a higher price. Safe to say, properties below market value do exist.
Did you know: When buying a house in cash, purchase the property at 70% market value. Cash gives you tremendous buying power as you can complete incredibly quickly
Strange question? Of course, you shout! Well, the short answer is yes, but you do need to be careful. As we mentioned, 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?”
Even if you feel you have been given a compelling reason you must still do your due diligence. This is because lying exists. And it happens. A lot. 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.
That said, you can still miss things – so with BMV properties, there is the risk that you but a cruddy property which causes you a headache. Also, when you’re trying to buy a property below market value, don’t always take the price tag of surrounding properties as a good indicator of value. Those might be selling at that price for any number of reasons.
Another thing to be aware of is the ‘get-rich-quick property guru’s who have a thousand below market value properties to offload to you because they’re very nice people. They know that a lot of people want to buy a house below market value and can sometimes use that and people’s inexperience to make a quick buck.
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.
But this won’t be you.
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.
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With that in mind let’s look at how we find properties that are BMV.
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.
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 questions 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.
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.
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