BMV property deal gone wrong – what would you do?

I hate to be the one to have to tell you this Alex but it looks to me as though you paid market value for your property on the basis that you can provide no evidence in the last two years of similar properties selling for the £125,000 figure you think your flat is worth. If you truly believe it is worth £125,000 then I suggest you sell it for that amount. Your mortgage is only £64,000 and you say you borrowed 80% of £80,000 so even after factoring in costs of buying and selling you will make a fantastic return on your capital invested if you really can sell it for that much. If you are right, go out and repeat the exercise and make your fortune as it's a much easier way to make a living that going to work every day. However, I suspect you will find that it will not sell for anywhere near to £125,000 which will prove that the valuer was right all along.

A tip for the future, property is generally only worth what the highest bidder will pay. To be sure you are getting a bargain you need to find realistic and recent comparables of properties which have sold for considerably more than similar properties you are looking to purchase. That's not easy! Clearly you didn't do enough research at the time and that's why you are so disappointed now.

The length of the lease will also detract from the value of the property as the cost of a lease extension has to be factored in

I completely agree Mark. It seems more and more investors are flocking to the auctions in the hope of getting a BMV property. It can be achieved but research is key. Too many bidders are going in half-cocked or over excited and having buyers remorse once they find out the propertys actual value.

Once bought, Elaine is correct that a valuer will take more than the recent local sales into account when trying to determine the value.

People should also take care that if the sellers are selling it 'warts and all' that it doesn't include any service charge arrears or major upcoming works that they will be required to contribute to.

In fairness to Alex he's not done too badly, even if it is only worth £90,000. I've seen plenty of deals where it's the other way around, i.e. people paying more than the property is worth. At least it sounds as though Alex could make a small profit on the deal and has a nice little investment property. It could have been a lot worse.

It's very easy to point the finger of blame at a valuer or a mortgage lender. However, try this - point at something and look at your hand - there will always be three little fingers pointing right back at you.

Hi, Alex

Sorry, but no chance on Further Advancing on this apartment even if you bought well, and Mark is right on value, it is probably nearer £100K not £125K. I bought an apartment repossession in Prestwich in 2009 for £102,500 that originally sold for £230,000 in 2007. Even now three years on I have only managed to secure a sale offer of £130,000 on it.

Values on apartments are being dragged down by bank repossessions. Consequently the valuers are downgrading valuations by around 10%. I was told by a valuer in absence of comparable data they are actually using repossession sales as market value and in some areas new build discount sales values are being used as market value whether its a forced sale or a bulk sale to investors.

My advise is to buy houses BMV and not apartments BMW, London being the exception here, at least with houses there are comparable sale data for valuers to use. It's hard enough as it is too get further advances let alone trying to do it on apartments. Good luck.

What is a property worth? I don't think valuers discount by 10 % but a lot more. The mortgage providers are getting harder because of the bad debts they suffered from buying sub prime stock from the USA.

I had a house 2 years ago worth £400,000 and wanted to borrow on the equity for another BTL. It was valued at £320k. I still own the house (rented out). It was a 4 bed semi with garage, 2 conservatories and off stree parking for 4 cars.

I converted the loft so it was a 5 bed in Croydon surrey, A 4 bed house sold 10 doors down for £425k at the same time.

I was looking for a 3 bed house in the same location they were all about £325k, same price as my 5 bed house half a mile away! There was no garage or parking!

I brought a 2 bed shalet bungalow in need of modernisation 1 mile away for £275k.

It may be easier now to sell than try to raise funds from banks B/s who do not want to give mortgages.

It's amazing as a landlord with £30k rental profit, for a loan they require me to have a Job earning £20k pa ( now Retired), I have to find 75-80% of the property price. The rent may be £700pm and the mortgage repayments be £450 but they are still cagy.

If it makes you feel better, I've lost a small fortune on BMV properties. During 2008/2009 my ex bought 3 properties saying they were typically 25% BMV. However, after paying the extortionate finders fees, mortgage fees, refurb fees I can honestly say that I've failed to make ANY money on them as they were located 200 miles away and managed by agents. Following my divorce I have managed to sell 2: one with a mortgage of £89k, originally valued at £125k but sold for £102k and the other with a mortgage of £71k, valued at £110k finally sold for £89k. With the above mentioned fees totalling around £10k each plus ongoing repairs (I appeared to own all the boundaries when the hurricanes hit and brought down the fences), tenant find fees and non payment of rent, it's been a very expensive mistake. One of the reasons my ex is an ex!

BMVs are great if you've done your homework or can manage the property yourself but for us there were too many middle men wanting to take their cut in a quick deal and, in those days, we were naive,

The best advice I can give is do your own research on valuation before purchasing the property. I eventually went to see one of mine only to discover that the valuer must have had a huge incentive to value the property at the price he or she did!

Sorry, it's meant to read "totalling £10k each property"

I don't know if this exists in the UK but you could try getting a line of credit (LOC) against the property. The rates are generally higher than mortgages and you usually need a good amount of equity of get an LOC.

I am ignoring the issue of market value as many others have commented on this. It seems to me that the length of the lease it is the key here, and the sooner it is addressed the better, as the property value and mortgageability will continue to diminish as the lease term gets shorter. I recommend that you enfranchise and get a longer lease asap as it will cost you more the longer you leave it as you will have to pay more to the Freeholder. You will have to be prepared to pay costs - but it should pay you long term. Good luck.