Back to Basics: How to Buy at Below Market Value from Estate Agents
Lots of people don’t believe you can buy “below market value” (BMV) from estate agents but there are ways and means, says David Lawrenson of LettingFocus.com.
Firstly, what is meant by “buying below market value”? Market value is whatever someone will pay for a property, so in a sense no-one really buys BMV – the term is a little silly, in my opinion. What you pay is the market price agreed between you and the vendor.
Many people just don’t seek so-called BMV property through estate agents – they don’t think they will get great deals that way. But at LettingFocus.com we disagree. We often get good deals this way. So how do we do it?
Well, the first thing is that estate agents are busy people who have lots of people who also want to buy property cheaply. Everyone wants something for below the going rate!
By David Lawrenson
You need to understand that, and persuade them you really can move fast and won’t let them down. You can in fact make their job easier – they get the sale done and you get them their commission.
Show them you are good for the money. On our last purchase (in Gravesend since you asked) we were cash buyers, which helps a lot. We could move fast and would not be waiting for a surveyor to come out and value the property for a lender… then waiting for another few weeks whilst the mortgage lender’s processes clunk into action and they finally deign to grant us a mortgage.
As we were buying an empty property that had been done up to sell, this was very persuasive for the vendor when it came to listening to our offer. He would get the property sold faster and the money in his bank account quickly.
Though we know a bit about buildings we are not experts, so hired a surveyor / builder to take a quick look around and tell us verbally if the place looked OK. With no long reports to file or legal liability to worry about, his fee was much smaller than one would pay for a fully written report, with the usual endless disclaimers and recommendation that we get this or that further checked out.
We met him at the property and could ask face to face if the things he saw were anything we should worry about. Given that the property was over 100 years old and with no obvious defects, we felt comfortable anyway but a surveyor was useful for extra assurance.
Second, you need a good conveyancer who can move fast. Not easy to find one, I know. And sorry, you cannot have the phone number of mine! Not even my personal consulting clients get that.
Third, you make it worth the estate agent’s while. We always offer them the letting business once we have bought the property so they will get something else (on top of the sales commission from the vendor). They are happy.
We don’t offer sweeteners (bribes) to agents as we think this is a little immoral and indeed illegal and it places the agent in a difficult position – they are supposed to be the seller’s agent, after all. However, we know this goes on, especially with dilapidated properties being bought as major refurbishment projects (where builders are often the main buyers). It is just that we don’t do it. Aiming to get on with estate agents and treating them with courtesy and respect goes a long way, we find.
We don’t do open days. We wait for a motivated vendor to come along. For example, someone in a chain who has their heart set on buying a property and whose own buyer has pulled out at the last minute will be willing to listen to our cheeky offer. If we can exchange fast, they may well accept a lower price so they can still complete on their dream house. We have solved their problem.
We make regular visits to keep in touch with estate agents. We tell them we are not interested in attending ‘open days’, but to only call us if they have a property where the vendor needs to exchange fast (as in the example above) or for some other reason – often death and divorce feature highly.
Sometimes it can be weeks before the right situation comes along – which is why we keep going down to say “Hi” to the agents every few weeks, to remind them we are still around and waiting. We also show them we still have funds, bringing bank statements and other financial statements to prove it.
We visit during the week when things are quieter – and they have more time to chat – so we have more time to develop a relationship.
If we don’t have cash, we may go for a bridging loan to get the deal done quickly, then switch onto a buy-to-let mortgage six months later. But the key thing is to be able to move fast and to be able to solve not just the vendor’s problem but also the agent’s too – selling the house and getting their commission from the vendor as soon as possible.
David Lawrenson is an independent consultant and full-time landlord who has no links to any other company. He does not sell or recommend property but can advise on property for his clients.
His website is LettingFocus.com and he can be reached at firstname.lastname@example.org. Visit the web site to sign up for free Property Investing and Landlords Information & Advice Newsletters for corporate and personal customers.
Successful Property Letting – How to Make Money in Buy to Let has been the top selling UK property book for seven years and has sold over 85,000 copies.