How to Find Below Market Value Property in the UK

Introduction

Even in a booming property market, it is possible for savvy investors to purchase property below market value. The secret lies in targeting motivated sellers who are distressed due to their property sale falling through. With persistence and the right strategy, you can capitalise on these opportunities and pick up discounted deals.

In this comprehensive guide, I will share proven techniques to help you find below market value property in the UK, even when the market is hot.

Understanding Why Sales Fall Through

Before diving into strategy, it’s important to understand why property sales fall through in the first place. According to UK government statistics, around 36% of agreed property sales end up failing and not completing. That’s over one in three!

There are a number of reasons why sales can fall through:

– The buyer or seller gets cold feet and pulls out of the deal.
– The buyer is unable to secure financing and their mortgage falls through.
– There is an issue with the property survey that makes the buyer reconsider.
– The buyer needs to sell their existing property first, but this sale falls through meaning they can no longer proceed.
– There are problems or delays in the legal conveyancing process.
– The wider property chain breaks down if one of the buyers/sellers in the chain pulls out.

As you can see, there are many reasons, but most centre around financing and the buyer pulling out. The end result is the property comes back on the market and the seller has to go through the painful process of finding a new buyer all over again.

Understanding why sales fall through equips you to target the right opportunities as an investor.

A Motivated Seller’s Mindset When a Sale Falls Through

Put yourself in the shoes of a seller who has agreed a sale, only for it to fall through further down the line.

Mentally, you have moved on from the property. You were relieved when the sale was agreed and looked forward to spending the proceeds on your next home. Having it all come crashing down is incredibly frustrating and disheartening.

Now you face having to market the property again, with all the associated stress and uncertainty that entails. More viewings, more waiting for offers, and the risk it doesn’t sell or the next buyer pulls out again.

As an investor, this motivation and distress presents opportunity for you. The seller simply wants the process to be over. They want certainty the sale will complete this time. They are therefore much more likely to show some flexibility on price or terms if it means getting the deal over the line.

This willingness to reduce the price and accept less favourable terms is what allows investors to acquire property below true market value. The key is identifying these motivated sellers.

Strategy #1 – Target ‘Sold Subject to Contract’ Listings

Properties that are marked as ‘sold subject to contract’ (STC) or ‘under offer’ on portals like Rightmove and Zoopla should be a major focus for investors.

The reason most investors ignore STC properties is because they assume the deal is done and dusted. In reality, there is still a high chance of the sale falling through.

Here are some tips for targeting STC listings:

– Set up saved searches on Rightmove and Zoopla for your target locations. Make sure to tick the box to include STC properties.
– Contact the agent for any suitable STC properties to express your interest.
– Ask how long ago the sale was agreed. Focus on those agreed over 8 weeks ago, as longer timescale means higher chance of falling through.
– Explain you are a serious cash buyer ready to move quickly. Ask to be notified if the sale falls through for any reason.
– Follow up with the agent every 2 weeks to check if the STC property is still proceeding. Be politely persistent.
– If a sale falls through, be ready to negotiate hard on price/terms. Offer to exchange quickly.

The key is being proactive. Don’t wait for the agent to come to you. By regularly contacting them about STC properties, you remain front of mind when a deal does fall apart.

Strategy #2 – Circle Back on Previously Rejected Offers

Here is another great technique for finding motivated sellers:

– Make offers on suitable properties even if you know they will likely be rejected.
– Keep records of everything – the property details, offer amount, agent details etc.
– Circle back periodically if the property is still on the market.
– Be persistent and keep bidding if rejected again. Offer to exchange quickly.
– Often an offer previously rejected may be accepted if the seller’s situation has changed.

I’ve seen this happen many times with my students. The buyer’s offer is too low initially and rejected. But if the seller struggles to find a buyer, they start to lower their expectations. When my student comes back with the same or slightly higher offer, the seller is now much more willing to accept it.

There is far less competition when you make offers on properties that have lingered on the market for months. The seller becomes more motivated the longer it takes to sell.

Strategy #3 – Direct Mail Sellers of Expired Listings

Another great approach is to target properties that were previously on the market but failed to sell. These are known as ‘expired listings’.

You can identify expired listings by looking at listings older than 6 months on portals like Rightmove to see if they are still marked as available.

Once identified, you can obtain the seller’s name and address through sites like 192.com.

Then it’s a case of sending them direct mail:

– Create professional mailer templates explaining you buy properties directly.
– Highlight you can purchase quickly with no chain and pay fair cash price.
– Mail to the expired listing addresses you have identified. Follow up with calls.
– Some motivated sellers will be keen to sell quickly to you having failed to sell previously.

This is a proven strategy for real estate investors in the US. It works just as well in the UK. You are targeting sellers who are likely distressed at having failed to sell previously.

Strategy #4 – Attend Property Auctions

Property auctions offer another opportunity to acquire property below market value.

Auctions work on unconditional bidding. This means the winning bidder is legally obliged to complete the purchase.

Many properties at auction end up going for less than full market value for a number of reasons:

– Distressed/forced sellers liquidating property – e.g repossessions.
– Inheritance properties where beneficiaries just want quick sales.
– Developers offloading properties that have become problematic.
– A failed previous auction with no reserve where bidding didn’t meet the reserve.

Auctions move fast, so you need to be organised:

– Research thoroughly beforehand and view properties you are interested in.
– Set limits on maximum bids for each property. Stick to your limits in the heat of the moment.
– Have finance ready so you can move quickly to exchange contracts if you win.
– Be prepared to negotiate hard with the seller on price if bidding doesn’t meet the reserve.

Auctions are not for novice investors, but done correctly can be a great source of below market value deals.

Conclusion

Despite booming market conditions, there are always motivated sellers willing to offer discounts if it means achieving a quick, certain sale. As an investor, your mission is to find them.

This guide has provided actionable strategies to help you find and acquire property below true market value – even when the market is hot.

The key lessons are:

– Target sellers in distress after sales falling through – they want certainty.
– Be relentless and proactive – don’t wait for deals to come to you.
– Leverage angles that other investors ignore – e.g STC properties.
– Do your research and move quickly when opportunities arise.

If you implement these strategies consistently and persistently, you will discover there are always deals to be found.

The difference between successful investors and unsuccessful investors is taking action. Those who put in the work to regularly execute these strategies will inevitably unearth opportunities.

Stay focused on your goals and be committed to taking consistent action over the long term. The results will follow.