What Is Gazumping?

It sounds like a word invented by Roald Dahl, but it's anything but...

Having an offer accepted on a property that you really love can feel like a truly euphoric moment. Unfortunately however this isn't the end of the road in the home buying journey, and there's still a couple of things that sadly can (and do) go wrong. And as a prospective buyer with an offer in and accepted on a property, one of the worst things that can go wrong is to be gazumped...

What is gazumping and is it illegal?

Gazumping is when another party makes a higher offer on a property that somebody else is currently in the process of buying. The seller then chooses to accept the higher offer, effectively pushing the original buyer out of the picture unless they too are able to increase their offer and 'gazump back' - which is of course not always possible. 

In the majority of cases, gazumping happens because a higher offer has been made on the property and the seller will want to maximise the amount they can get out of their property, thus accepting the higher offer. However it can also occur when the seller wants to complete quickly and will therefore choose to sell to a party who can move and complete quicker than the buyer who made the original offer. 

It goes without saying that being gazumped is an incredibly frustrating and disheartening time, however sadly despite being largely viewed as unethical, the practice is not illegal. Whilst the seller may have agreed to an offer, this agreement only becomes legally binding once the contracts have been exchanged, meaning that up until this point anything can happen. Due to the fact that contracts are exchanged late on in the process of the home buying journey, buyers who are gazumped last minute can find themselves out of pocket if they have paid for things such as a buildings survey.

What can you do to protect yourself?

Get home buying protection insurance

This protects you as the buyer from the seller either changing their mind about selling altogether or choosing to go with a higher offer instead. Buyers can claim back some of their expenses spent on things such as survey or conveyancing fees. It costs just £50 and is valid for 120 days, or there is a longer term available for 180 days. For not a lot of money, this can help to soften the blow if you are gazumped last minute. 

Ask the sellers to take the property off of the market

You can ask the sellers to take the property off of the market once they have accepted your offer. Some sellers may not be as willing to do this, whilst others may be more open to the idea and happy to go along if they believe you to be a serious buyer. To show you are serious, you could agree to arrange a survey for as soon as possible. If the seller is looking to complete quickly, this will appeal to them and they may be more willing to take the property off of the market and stick with you as a credible buyer.

Be prepared

Make sure you are indeed ready to buy a home! You will want to make sure things such as your mortgage in principle is in place, you have a solicitor lined up and any relevant and necessary paperwork to hand so that you're good to go from the very start. Furthermore, if you're not a first time buyer, make sure your own home is already on the market. If the seller realises it could take months and months for you to sell your own home because it isn't even listed as for sale yet, they may feel a little put out by the prospect of a lengthy time frame. If you're circumstances allow it, consider selling up and renting or staying with family and friends so that you're as good to the seller as a first time buyer. 

Act quickly

 Things like surveys take time, so the quicker you are at getting these organised one your offer has been accepted, the less time there is for possible gazumping to take place! As already mentioned, things only become legally binding when contracts are exchanged, therefore you will want to get to this point as quickly as possible. Make sure you keep chasing up your conveyancing solicitor and make it clear that you want to complete as quickly as possible so that your case doesn't fall to the bottom of the pile and keep things moving by responding to any emails for information. 

Consider a lock in agreement

The seller will have to agree to this of course, however what this essentially does is stop them from negotiating with any other parties within a fixed period. This effectively gives you the exclusive right to buy the property within that set time frame, allowing for things such as surveys to be organised and carried out without fear of being gazumped. This may appeal to sellers who have had a sale fall through in the past. There will be a cost involved, however it's worth considering if you're particularly concerned about being gazumped. 

What can you do if you've been gazumped?

If you have been gazumped, it's not the end of the road! There are things that you can do to try and get the sale back on track.

 Firstly, ask yourself the question of whether you can gazump back. Review your finances thoroughly however - it's not worth risking financial difficulties for years to come just to secure a house. It's easy in the disappointment to convince yourself there will never be a house you like just as much, however there will be, so don't stretch yourself to your financial limits during an emotional and stressful time! If doing so is the only way to secure the property, walk away. And of course, if you are able to offer higher, be prepared that you could well be gazumped again. 

If increasing your offer is out of the question, try appealing to your vendor. What works in your favour? For example, are you chain free, can you complete quickly? These things can influence a seller's decision, so make them known. It can sometimes feel as though sellers are only bothered about getting the most money out of their property and will therefore always accept a higher offer, however this isn't always the case - sellers will want to move forward with the most credible buyer which isn't always the person who can throw the most money into the mix.

For example some sellers may be wary of accepting a higher offer as this could result is them being 'gazundered' further down the line. This is where before completion, the buyer dramatically reduces their offer, however if there are time pressures involed with the move, sellers can often feel that they have no choice but to accept the lower offer rather than have the buyer back out of the sale completely. As already mentioned, sellers will want to proceed with the most credible buyer, and this will be especially true of sellers who have had sales fall through previously. 

You could also find that your sellers in their own history of buying and selling property have been gazumped themselves, and therefore understand how disheartening it can be as the buyer to have this happen. As such you may have sellers that from a moral standpoint are unwillingly to accept further offers once they have agreed to yours.

Finally, don't underestimate the swaying power that really loving a property can have. Most sellers will want their home to pass into good hands and if they can see that you really love their property and are excited about putting down roots there, they could choose to go with you as a buyer over somebody that can offer more money, but who seems less enthusiastic about the actual property overall. 

Publish date: 28/08/2018

Publisher: New Home Finder

Url: https://www.newhomefinder.co.uk/new-home-info/moving/what-is-gazumping