Dec
12
BMV – What Does It Mean?
If you have been involved with property investing for more than few months now, you have probably heard the buzz-term ‘below market value’ or BMV. What does BMV actually mean and how can it affect how you plan your property investment strategies?
Below market value or BMV means to purchase a property below what the market deems its cost to be. Essentially you are buying a property for less than it is worth and therefore will be able to make an easy profit on it. Why would someone sell a property for a price below the market value? The majority of homeowners are looking for 3 things when they sell their properties: money, transaction speed and security. In some situations a homeowner will give up the benefits of security and speed in order to hold out for more money. So they would take a price of 165K over 150K, even if the 150K buyer could have the funds ready in less than 30 days and they would have to wait 60 days for the 165K. In most situations the homeowner will hold out for more money. However, sometimes a situation develops where getting the money and security quickly outweighs the amount of money the homeowner will receive. So the homeowner will sell the house for 150k because the deal would be finished in 30 days, when they need the money by. This second example represents a BMV or below market value purchase.
It is also hard to determine the exact market price for a property at any given time. You can determine an estimate based on how much similar properties in the area have sold for and so forth. However, there is a very big difference between the asking price and the market value. Just because you may be purchasing a property for below the asking price doesn’t necessarily mean you are getting the house below the market price.
In order to benefit from BMV properties, you have to understand this difference. In order to be considered a BMV property the property has to be for sale for a price that is actually below the market’s considered value. It all depends on whether or not you are able to locate that very specific seller, the one who values the speed of the transaction and the security of the sale over the amount of money they will receive. This represents a true BMV property and it will take some research to truly locate one. If you are able to locate such a seller, then you may be able to purchase a property for less than what the market values it. Once this property is yours and assuming that the market value doesn’t decrease, then you have automatically made yourself a profit if you choose to re-sell the house. This can be very beneficial to you- if the property is indeed offered at a BMV price.
