NO MONEY DOWN DEALS AND BELOW MARKET VALUE, BMV THREATENED says LAWRENSON OF LETTINGFOCUS.COM

Another casualty of the credit crunch is the “NO Money Down BELOW MARKET VALUE Deals.
I have written about how this works before but in essence how it works is that you buy a property at say 20% below market value from a motivated or distressed seller using a bridging loan and get a remortgage next day for the full market value.
That way you can buy the property with No Money Down.
The problem is that the only mortgage lender prepared to do these types of deals, the Mortgage Express, has I hear, pulled out of doing this business.
No doubt they have been spooked by the credit crunch and the fact that such deals look ever more risky as long as property prices remain shaky.
Also, lenders must have got increasingly nervous about the rental income potential from “sellers turned tenants” on the sale and rent back version of these deals (as that person will by definition probably have some history of not paying their financial obligations)
In the light of the banks new found timidity to lend, Mortgage Express would recently have also become scared of the fact that so many novices (and hence inexperienced landlord investors) were so keen to get in on this kind of deal. This is not surprising as these routes to wealth are heavily promoted at trade shows.
But I understand from one experienced Below Market Value Operator that the doors are also now closed to experienced BMV players too.
According to my contact, this now means the only way to proceed is to hold the property for 6 months on a bridging loan and then re-mortgage. And that ain’t cheap!
It is a shame because Buying Below Market Value or BMV using a bridging loan has it merits.
I will be interested to see what the promoters of seminars on BMV at the Property Investor Show in Manchester next week make of all this and how they will proceed.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a property expert from lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the UK's top selling buy to let book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value. I’m an expert public speaker on property and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I can provide advice for landlords
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Good deal on repossessed property at auction by Lawrenson of LettingFocus

Years ago, buying property at auctions was the preserve of a few professional investors and builders. However, more and more people (and financial institutions) are now both buying and selling property at auction, so that today the volumes sold are approximately three and half times what they were 10 years ago.
Around one eighth of all residential property sold at auction is now a repossession and about one eighth of all repossessed property eventually finds its way to the auction house.
But can you bag a bargain at an auction and what do you need to know?
Well, the first thing to remember is that the auctioneer’s client is the vendor, not you. In this much he is just like an estate agent whose duty is to get the best (read highest price) for the client.
However, whereas some estate agents will often let slip information on what price the vendor will accept, you are not likely to get any such tips from an auctioneer.
Remember too, that you will be in a room competing with other buyers and the auctioneer will be doing all he can to squeeze out an extra five hundred pound from the bidders.

Repossesions Are On the Up
All auctions are seeing a big rise in repossessed flats which were bought off plan by would be investors.
Many of these investors bought the flats with rental guarantees from builders or via property clubs, often on 2 or 3 years fixed rate mortgages taken out in 2004 or 2005.
With the rental guarantee ended these landlords were left competing with hundreds of others for a limited tenant pool. They were also facing having to remortgage at higher borrowing costs.
As an example, at a recent auction, a two bedroom flat in SE London, which had sold at £250,000 in 2005 was put on at a reserve price of £175,000 but still failed to sell.

Check with Estate Agents First
Most repossessions will be marketed at estate agents first and only then come to auctions, so it’s always worth keeping in with the agents who handle repos (not all do) to see what’s coming up there first.
So, there are always good deals on offer especially on these oversupplied me too city centre flat. However, with the dearth of tenant demand, you have to ask if they will ever be a good investment.
At auction, you and your conveyancer will have had to study the legal pack, do your viewings and survey, arrange the finance and insurance in principle before the fall of the gavel.
You’ll also have to pay 10% of the purchase price right there at auction and you must also normally complete within 28 days though a seller may allow you longer. You will also have to pay the auctioneer’s fees - usually 2.5% plus the stamp duty.

Ten Tips for Success at Auction
Go to a few auctions first before you bid. Understand how it works and feel comfortable.
Ask for the package compiled by the auctioneer at least 4 weeks before the auction. Get your conveyancer to study it carefully. Look at the contract, the title documentation, the searches, whether there is any outstanding planning or environment issues etc and replies to general enquiries.
On the day of the auction, arrive early; check the “addendum” and the legal pack in case anything like special conditions have been added.
Keep cool and stick to your maximum price.
If you go with a partner, sit together as it’s been known for partners sitting in different corners to bid against each other! B
The auctioneer, vendor or their agent can bid up to the reserve price without identifying themselves. It’s called “off the wall” or “imaginary” bidding.
If the sales details quote “unless previously sold” you should be able to approach the auction house and make a bid in advance of the auction. If it’s accepted, you’ll still need to move fast and ensure finance is ready and conveyancing can be done quickly.
If the property hasn’t met its reserve, the auctioneer will normally tell you what the reserve is and advise if he has the vendor’s authority to sell at the reserve price for up to 24 hours after the auction. This can be a good way of snaffling bargains.
Forthcoming auctions are advertised in local newspapers, as well as on the Internet or in the Estates Gazzette magazine.
Get real! Don’t come expecting to buy a £300,000 place for £150,000. However, you may well bag one for £270000 or even a shade less.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property investment experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiasedproperty networking seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make money.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.I can answer all your questions on letting property because I have been a landlord and property investor for over 25 years.

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