Below market value
Below market value, often shortened to BMV, means buying a property for less than its market value, the price it would achieve on the open market with proper marketing. The appeal for investors is instant equity: if you buy a property worth £240,000 for £200,000, you hold £40,000 of equity from completion rather than waiting years for prices to rise. Discounts are usually the result of a seller who values speed and certainty over the highest possible price.
Why properties sell below market value
A genuine below market value sale almost always comes from a motivated seller. Common reasons include financial difficulty or the threat of repossession, divorce or separation where both parties want a clean break, probate or an inherited property the beneficiaries would rather not manage, emigration or relocation on a deadline, and properties in poor condition that would struggle to attract ordinary buyers. In each case the seller accepts a lower price in exchange for a faster, more certain transaction. Auctions are another route, where competition and the condition of lots can produce larger discounts.
How big is a typical discount?
In the UK a below market value discount is commonly in the region of 10% to 25%, with larger reductions of up to around 40% sometimes seen at auction or in cases of serious distress. The figure depends entirely on the seller's circumstances and the property's condition. From working with self-managing landlords across the UK, the discounts advertised as below market value are often measured against an inflated asking price rather than a true valuation, so the real saving is frequently smaller than it looks.
Why investors target BMV property
Buying below market value improves the numbers in several ways. The equity built in at purchase provides a cushion against a falling market, the lower price lifts the rental yield because the rent is measured against a smaller outlay, and a property bought cheaply and then improved can be refinanced at its higher value to recover the deposit, which is the basis of an all money out deal. As experienced investors put it, much of the profit in property is made at the point of purchase.
Buying below market value is the first step of the BRRRR method, where the discount and the refurbishment together create the equity that funds the next purchase.
The lender reality and genuine versus inflated BMV
One point catches new investors out. Mortgage lenders advance against the lower of the purchase price or their own valuation, so a genuine discount does not usually reduce the cash deposit you need, and many buy-to-let lenders also apply a six-month ownership rule before they will lend against a higher value. You can model the deposit and loan-to-value with our buy-to-let mortgage calculator. Because the term is heavily marketed, treat any claimed discount with care. Check the price against HM Land Registry sold prices for comparable properties and, where it matters, an independent RICS valuation, rather than the seller's or sourcer's figure. Landlords using August who buy below market value tell us the real deals come from motivated sellers and clear comparable evidence, not from sourcing lists promising a fixed percentage off.
Selling below market value and tax
Selling below market value does not let you sidestep tax when the buyer is a connected person, such as a family member. For capital gains tax, HMRC treats a transfer between connected people as taking place at market value regardless of the price actually paid, so the gain is calculated on the full value. The discount given away can also count as a gift for inheritance tax, which may matter if the person making the gift dies within seven years. An arm's length sale to an unconnected buyer is different: there the agreed price is the price, and only that changes hands.
Frequently asked questions
How much below market value do house-buying companies offer?
Quick-sale and "we buy any house" companies typically offer somewhere between about 75% and 85% of market value, that is a discount of roughly 15% to 25%. The reduction pays for the speed and certainty of a guaranteed cash purchase with no chain.
Can you sell a house below market value to family?
Yes, you can agree any price with a family member, but it does not change the tax position. HMRC calculates capital gains tax as if the property sold at full market value because you are connected persons, and the discount may have inheritance tax consequences.
How do you check a below market value deal is genuine?
Compare the price against HM Land Registry sold prices for similar nearby properties and, for a significant purchase, obtain an independent RICS valuation. A genuine discount stands up against real comparable evidence; a fake one relies on an inflated starting figure.
