Property Sourcers: What You Need to be Aware of with Below Market Value (BMV) Deals

Navigating Below Market Value (BMV) property deals can be an attractive opportunity for sourcing agents and deal packagers alike.

The promise of finding properties at significant discounts, coupled with the potential to earn lucrative fees, often draws professionals to this area of property sourcing. However, it’s essential to approach BMV deals with caution, ethical consideration, and an understanding of the long-term risks involved.

BMV Deals: The Reality

BMV deals typically involve sellers who are facing financial difficulties or other challenging circumstances. It’s common to hear these individuals described as "motivated sellers." However, it’s vital to look beyond the terminology often used in training courses and on social media. A more accurate term might be "vulnerable sellers," and often involve one of the following:

Financial Struggles

Many sellers offering BMV properties are grappling with financial problems. Selling at a discount might be their way of avoiding repossession or clearing debts, but it could leave them in an even worse financial position.

Tired or Fed-Up Landlords

Some landlords may simply want to offload their properties quickly, tired of the responsibility or motivated by tax considerations. These cases may seem relatively straightforward, but due diligence is still crucial.

Desperation to Sell

Sellers desperate to escape financial or personal challenges may agree to steep discounts on their property price. It’s essential to assess the ethics and practical implications of such transactions.

While the phrase “motivated seller” makes the process sound appealing, remember that you are often dealing with individuals in stressful, vulnerable situations.

Ethical Considerations for Sourcing Agents and BMV Deals

When working on a BMV deal, sourcing agents have a duty to act ethically and responsibly. We've included some key points to review before working on a deal of this type:

1. Vulnerability and Redress Scheme Expectations

Both The Property Ombudsman (TPO) and Property Redress (PR) recognise vulnerable sellers and expect sourcing agents to handle these cases appropriately. If a transaction might leave the seller in further financial distress, it is your responsibility to signpost them to alternative resources for support (see more information below).

1. Moral Implications

Would you feel comfortable knowing the deal you’ve arranged could worsen someone’s financial or personal situation? If not, consider whether proceeding aligns with your professional and personal ethics.

1. Clawback Risk

Be aware that if a seller later faces bankruptcy within the next five to six years, the Insolvency Act allows practitioners to recover assets sold at a significant discount. This includes property deals completed via BMV transactions, potentially putting your professional indemnity insurance and reputation on the line.

1. Avoid Overpromising Solutions

Some training courses claim sourcing agents can stop repossessions by representing homeowners in court. Unless you have the proper legal expertise, making such promises can harm the seller more than help. Always stay within your scope of professional competency.

Long-Term Risks for Sourcing Agents

The allure of a significant discount can overshadow the potential risks tied to BMV deals. It’s crucial to remember the following:

Impact on Your Professional Indemnity (PI) Insurance

If a deal is later challenged due to bankruptcy or insolvency, your actions as the agent may be scrutinised. This could lead to costly claims against your insurance.

Legal Offences

Assisting in the sale of assets by someone likely to face bankruptcy could potentially breach legal regulations. Ensure compliance to avoid unintended consequences.

Impact on Reputation

By placing ethical considerations first and treating sellers as people rather than financial opportunities, you’re likely to build a positive reputation and foster word-of-mouth recommendations for future business.

Resources for Supporting Vulnerable Sellers

For sellers facing significant challenges, it’s often more important to provide support than secure a deal. Here are some helpful resources to share with distressed or vulnerable individuals:

The Samaritans

Call 116 123 for a free, 24/7 listening service / Visit their website

Campaign Against Living Miserably (CALM)

Phone 0800 58 58 58 (5pm–midnight daily) / Visit their website

National Suicide Prevention Helpline UK

Call 0800 689 5652 (6pm–midnight daily)

Local Crisis Teams

Sellers can search their local crisis team numbers online for immediate help.

Shout

Text ‘SHOUT’ to 85258 for a free, 24/7 confidential text service.

Repossession Rescue

Visit website and contact Trish for support

Additionally, consider connecting sellers with local housing or financial advisors to explore better alternatives before committing to a property sale under pressure.