3 Things You Need To Know When Buying BMV (Below Market Value) Properties
There are very few opportunities for a real estate investor to make as handsome a return as when dealing with BMV properties. If you know where to find those deals, you are well on your way to making good money.
1) Why people sell below market value
In my career as a real estate investor, I have seldom come across opportunities as lucrative as dealing with BMV properties. BMV stands for ‘below market value’. As you can tell, these are properties that are put on the market, for one reason or the other, with an asking price that is way below the actual value of the property.
This happens when sellers are usually in a rush to sell. In some cases, it is about offloading a home after a bitter divorce; in some it is about offloading the home to cater for other debts. In many cases, it may be an effort to avoid repossession.
The bottom line is that the seller is almost always faced with a financial difficulty so severe that they have resorted to selling the home to mitigate the situation. By selling their home at below market value, it means that they can dispose of the property at a much faster rate than they normally would had it gone on the market at its actual value.
2) Not all BMV properties are worth it
While BMV properties can allow you to buy low, which ideally improves your chances of making profit later on, the ideal doesn’t always match the reality. The truth is that some BMV offers can cost you more money in the long run, so be selective on what you choose.
For instance, properties that have been foreclosed may be trashed by their disgruntled homeowners. You may get the place at below market value, but the cost for refurbishments could easily offset that.
3) Sellers of BMV properties need cash ASAP
Another challenge when dealing with sellers in financial difficulty is many of them want their cash quickly. Some people think that desperate sellers are the best sellers to haggle with because they are the ones in need. But in these kinds of situations, distressed sellers have an idea of what they need, and they won’t be able go lower than that threshold they’ve estimated. Moreover, the property for sale is already being sold at an attractive price, which means there will be more competition from other buyers. Unless you are liquid and are able to secure financing quickly, you may end up missing opportunities.
The upside to this is sellers who need to sell quickly also become more open to more flexible terms. So if you are unable to secure financing to purchase the property, you can still negotiate for a flexible payment plans like lease options and the like. I have attended events that discuss these types of deals from investors like Reena Malra, Simon Zutshi and Rick Otton among others. Many of these events are usually packed, which hints at a growing demand for flexible payment terms. So if you can’t come up with all the money now, negotiating for flexible terms is worth the shot.