Below market value property finance

Buying at below market value is when the seller is offering a deal or special price to a buyer, which is below the usual valuation or asking price of a property. This can be because of a number of reasons but can include sellers needing quick access to funds, properties that are incomplete, repossessions, or properties for sale at auction.

Below market deals may not be around for long. If you need quick access to funds to purchase a property, a bridging loan might be the right solution for you.

Mortgage lenders are usually only prepared to provide finance to landlords for properties based on the purchase price or at least within 10-15% of its market value. As such, where the property is being sold at well below market value, you may not be able to borrow with a mortgage. This is where a bridging loan may be a good alternative.

Typically properties at bigger discounts are cheaper because they need work doing to them. Bridging loan will fund both the purchase price and the cost of works.

Bridging loans enable you to get access to finance faster than a mortgage. They can also be used when a property is incomplete, such as lacking a bathroom or kitchen, which would not meet mortgage criteria or otherwise need work doing to them.

Market value can be very subjective. It is the amount at which a buyer and seller are happy to negotiate at.

There are some factors which you will need to analyse to calculate the market value:

• The current property market climate, both national and local
• Similar properties that have recently sold in the area
• Property price predictions, but remember they are not guaranteed
• Plans for the local area that may increase or decrease the value

There are online calculators that can help you calculate the market value of a property. Lenders will employ a professional valuer when they’re calculating the market value to use within a loan.

No, lenders will base the amount they are prepared to loan on the open market value or the purchase price, whichever is the lower.

Yes, it is an option - anyone can sell their property below market value. Everyone has the right to sell at any price they deem is appropriate. However, if there is finance secured against the property that needs to be paid off, it wouldn't be advisable to sell at less than this figure, unless separate funds are available to clear the balance.

There are several reasons why people may sell their property below market value. Here are some of the most common ones:

• Quick sale – some sellers may need to sell their property quickly due to financial difficulties, divorce, or relocation, and may choose to price the property below market value to attract buyers and facilitate a fast sale.
• Inheritance – when an inherited property is sold, the heirs may want to sell it quickly and may choose to price it below market value to attract buyers and avoid lengthy sales process.
• Property condition – a property that needs significant repairs or renovations may be priced below market value to compensate for the additional costs that a buyer may need to incur to make it habitable.
• Buyer competition – when there is high demand for properties in a particular area, a seller may price the property below market value to attract multiple buyers and generate a bidding war, which could potentially drive up the price.

There are several ways to find properties that are priced below market value, including:

• Working with an estate agent who has experience with distressed property sales, auctions, or has clients who want to sell quickly.
• Searching online listing websites that specialise in distressed properties or auctions.
• Monitoring local foreclosure listings or attending foreclosure auctions.
• Searching for properties that have been on the market for a long time, which may indicate that the price is too high.
• Networking with other investors or property professionals, who may have knowledge of distressed properties.

To ensure that you are getting a good deal when buying a property below market value, consider the following:

• Research the local property market to determine the fair market value of similar properties in the area.
• Have the property inspected by a professional to identify any potential issues or necessary repairs.
• Review the seller’s disclosure forms to ensure you are aware of all known issues.
• Have a legal representative review the purchase agreement and any other legal documents.
• Where heavy works are required, get quotes so you know all costs before committing to buy and make sure the full amount is what you can afford, with a contingency amount for any unforeseen additional costs.
• Ensure that you have adequate financing in place to cover the purchase price and repairs or renovations needed.

The process of buying a property below market value can vary depending on the specific circumstances of the sale. However, it may involve some or all of the following steps:

• Finding a property
• Conducting research on the property and the local property market.
• Having the property inspected by a professional surveyor.
• Getting quotes for any renovations from appropriate contractors (e.g. builders, plumbers, electrician, gas engineers).
• Negotiating with the seller and their agent to agree on a purchase price and the sale terms.
• Obtaining financing or making cash arrangements to purchase the property.
• Getting all legal conveyancing work done to complete the sale.
• Closing the sale and taking possession of the property.

Here are some tips for successfully buying a property below market value:

• Work with an experienced estate agent who has expertise in buying distressed properties.
• Conduct thorough research on the property and the local property market.
• Be prepared to act quickly when a good opportunity arises.
• Be willing to invest in repairs or renovations to bring the property up to the market value.
• Obtain pre-approval for financing or have cash available for the purchase.
• Have a plan for the property, whether it is to resell for a profit, to let out for income, or live in it yourself.