The word ‘gazumping’ is enough to strike fear into the hearts of every home buyer. You’ve heard the term, you know it’s bad, but what exactly is it? Gazumping is when a seller accepts a higher offer on their home after already accepting another buyer’s offer. When this happens, the original buyer has been gazumped and the seller is the gazumper.
Naturally, sellers want to accept the highest possible offer for their property, even if it means a slightly unethical decision to gazump the original buyer. Gazumping is not always carried out in the name of money – sometimes it can be due to timing, particularly if there are delays in mortgage arrangements and conveyancing, or if the buyer is dragging their feet. If this is the case and the seller wants a quick sale, then they may be tempted to accept another offer from a buyer who is in a better position to move forwards.
What are the implications of gazumping?
The original buyer is the victim in the situation and it can be a devastating position to be in. Not only can it be utterly shattering to lose the property you had your heart set on, it can also have serious financial implications. Often the original buyer has already forked out for survey charges, conveyancing costs and mortgage arrangement fees.
Some buyers are under the impression that gazumping is unlawful; although the government has previously been called upon to make it illegal, the frustrating practice is still allowed in the UK. Ultimately the deal is not legally binding until contracts are exchanged. It is why you see Sold STC (subject to contracts) on property websites, as there is always the possibility of things going wrong.
Nevertheless, it is good for buyers to be aware of gazumping, not only to avoid premature celebrations, but also so they can take simple steps to avoid it as much as possible.
Wait, what’s gazundering then?
Not to be confused with gazumping, gazundering is to the detriment of the seller and is when the buyer lowers their offer at the last minute, just before contracts are exchanged. There is often a lot of pressure on the seller to accept the new offer, given that they are now a long way through the process and also to avoid the chain collapsing.
We’ll discuss gazundering in more detail in another article but for now, back to gazumping…
How to avoid gazumping?
Ensure everything is in place to make the exchange process as smooth as possible. Set up a mortgage in principle (a conditional offer from the lender), line up your solicitor and have a surveyor in the pipeline. In short, anything that will help to avoid unnecessary delays to the process. Ideally you’ll also have accepted an offer on your current home to prevent any timely setbacks.
Being prepared will help this process but we also recommend keeping everyone on their toes. Stay in constant contact with your solicitor and mortgage broker to ramp up the pressure and be responsive and accessible all the time. There’s only so much you can do to speed up the process but applying a bit of gentle pressure never hurt anyone.
If you are really concerned about being gazumped and losing out financially, you may want to consider taking out insurance. Home buyer protection insurance will allow you to claim back a portion of any fees already paid for, such as conveyancing or surveys. Although it won’t stop the heartache, it will at least soften the financial blow of being gazumped.
Property off market
Ask for the property to be taken off the market; it is not an unreasonable request and shows your dedication to the sale. The sellers may not be willing but you have nothing to lose by asking. If the property is no longer visible to the general public then it significantly reduces the chances of someone else making a better offer.
Build a good relationship with the seller
This is about appealing to the ethical side of the seller; if you have established a good relationship with them then they are less likely to shun your offer for a higher one. There’s no need to be best buddies but take the time to get to know the seller and build a genuine relationship. It will help to ensure that they make a more morally sound decision if the fatal gazumping situation should arise.
‘Lock in’ agreement
Confusingly, sometimes known as a ‘lock out’ agreement. If you’re really panicking over this whole gazumping situation then you may want to consider a lock in agreement in which the seller agrees not to accept other offers within a certain period of time. The only caveat with this is that the seller has to agree but you’d be surprised how many sellers are more than willing to do this, especially if they have been burnt in the past by a sale falling through.
Although it is beneficial to the buyer in that they can avoid being gazumped, it is also advantageous to the seller, as it shows the buyer’s commitment to the property. It may cost a little extra as it will need to be arranged by your solicitor but it significantly reduces the stress involved for both parties.
Help me, I’ve been gazumped!
If the worst happens and you find yourself having been gazumped then there are a couple of steps to take to try and pull back the situation. You could of course gazump the gazumper by putting in a higher offer. However, it’s important not to overstretch your financial capabilities in the heat of the moment and there’s no saying that you won’t be gazumped again. It is also worth appealing to their humanity and highlighting why you want the home so much, as well as all the positives you have to offer. For example, perhaps you are a first time buyer and therefore chain free or you are a cash buyer and therefore mortgage free.
Other than that, there is not an awful lot you can do. Although you can never be sure to avoid it, taking the above steps will at least help to reduce the chances of it happening. For further help with finding or selling a property, get in touch with the James Anderson team.