Funding property below market value

Below Market Value (BMV) properties are residential properties that are available for sale below their true market value. This is usually because the owners are faced with some kind of financial difficulty and want, or need, to dispose of their property quickly and without going through a prolonged marketing and sales process - quite often under the threat of repossession. There can be many situations where it is possible to buy a property below market value. These can include:

• A ‘motivated seller’ where the sale of this property provides urgently needed funds for a life or business change that benefits them overall and so a lower offer is accepted in return for a quick, chain free, completion.
• Auction purchases where an investor has been fortunate enough to spot an opportunity or simply been lucky. Another possibility is a lot that failed to sell.
• Properties in probate where the beneficiaries set to inherit the asset want a quick and easy sale.
• Tired or derelict stock that has ended up with an agent. Property in need of development or refurbishment is often introduced ‘off market’ to local contacts of those agents.
• Landlords selling portfolios who prefer one transaction to reduce fees, effort and time in the selling off process – this is often called a ‘block investment’ purchase.

There could be many other reasons - but they all could mean securing a bargain property - but problems with some lenders.

This is because property lending is secured on the property itself. A property that fails to meet market expectations is difficult for the lender to assess. If it does not meet the standard criteria, which include pricing, it can be difficult for the lender to be certain that the property valuation is correct.

In other words, the lender is not certain that he would be able to recover his losses if the borrower became unable to make the repayments and the property had to be sold. 

There can also be concerns about fraud - where a property is sold at a reduced price as part of a deception designed to extract funds that will never be paid back. Even when a sale is legitimate, there can be worries about the financial circumstances of the seller. A landlord who legitimately purchases a Below Market Value (BMV) property could find that the seller has become bankrupt and that their creditors are coming after the landlord with a court order to either reverse the sale or claim back the difference between the open market value of the property and its sale price. This is because the Insolvency Act allows trustees of a bankrupt to protect themselves from the bankrupt giving away their assets or selling them at below the market price. 

A landlord purchasing a Below Market Value (BMV) property as an investment is potentially exposed to these provisions for up to 5 years, assuming no fraud or the parties are associated in any way.

However, there are a number of lenders who can consider various types of BMV property funding. At Rangewell, we can help secure commercial mortgages, specialist BMV buy to let mortgages and ‘Stretched’ bridging finance - all of which can be set up with safeguards to protect you - and with funds provided quickly. 

Finding the lenders you need

Finding the right lender can be hard for all borrowers but, at Rangewell, we can make things a little easier. We know all the lenders in the market - including lenders who provide BMV commercial mortgages but tend to not advertise them. Whether you are buying a property to use as business premises or as an investment, we can help you secure the rates and terms you need.

At Rangewell, we work with lenders across the market and have access to the full range of property funding products. It lets us use our property finance expertise to support your business – and ensure that you have the financial solutions you need.

If you have the chance to buy a property at below-market rates and want to take full advantage of a rare opportunity, call us for the help you need.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.