What is gazumping?…. So, you’ve found a property on Rightmove, had a couple of viewings with the Estate Agents and decided that the property is definitely for you.
After a little negotiation with the estate agent and owner, you have made an offer and it has been accepted, perhaps over the phone or at the estate agents. Next thing you know, your best and final offer is disregarded after the buyer has accepted a higher offer from another bidder.
That’s when it’s clear you’ve been gazumped!
Gazumping is, essentially, when somebody succeeds in acquiring a property, when they place a higher offer than one already accepted by the seller from somebody else.
Gazumping can also be when a seller suddenly demands a higher price on the property, after previously accepting a lower offer.
Ultimately, gazumping is a home buyer’s worst fear. First of all, they’ve found their dream home and believe they’ve secured it, only to lose out on it, thanks to a mystery buyer with more cash.
To make things worse, the buyer may also have invested in a structural surveys, conveyancing and mortgage arrangement fees for the property, which are wasted one they have been gazumped by a wealthier buyer. Ultimately, the buyer with less disposable cash loses out on more in a gazumping situation.
In an extremely unfortunate situation, the gazumped buyer may even need to fork out the deposit or 10% of the property value. This would make purchasing another house simply impossible for first time buyers.
What’s more, estate agents are not keen on a gazumping situation. After all, although they may see a little extra profit from a higher house sale, the gazumped buyer is highly likely to feel let down by the agents and are very unlikely to want to use their services in future.
Should a gazumped victim up their offer?
Although it is very unlikely that the gazumped party would have enough cash to up their offer, it is a permitted action.
If you are thinking about upping your offer after being gazumped, however, it is necessary to consider what you’ll do if you are gazumped again (the other buyer may be determined to get their hands on the property!) and, of course, whether you can actually commit to such a high property price. Would you be too financially stretched?
Is gazumping legal?
Gazumping is clearly morally wrong, but it is currently legal, despite the fact that many people are surprised that society accepts this behaviour on the property ladder.
Despite the fact that gazumping is not illegal in the UK, it is far less likely to occur in Scotland where homes are sold by solicitors, restricted by anti-gazumping rules.
In England and Wales, many people are surprised that a seller can accept two offers on their house at the same time, which ultimately makes gazumping a legal act.
How to reduce your risk of being gazumped
Although gazumping is not illegal in the UK and Wales and therefore does take place in the property market, there are a few ways you can reduce your risk of being gazumped. These include:
Ask for the property to be taken off the market:
Once your offer has been accepted on the property, the property should be labelled by the estate agent as ‘Under Offer’ and, therefore, off the market until the purchase has gone through when the property will under new ownership.
Keep chasing the estate agents for the exchange of contracts:
Buying a property is a long process that can often leave people anxious and worried that their purchase will fall through. Make sure you stay in regular communication with your estate agent and keep putting your case forward with solicitors.
Be prepared and get yourself organised:
If you require a mortgage, this should be in place before even putting an offer on a property. Having a mortgage agreement ‘in principle’ will give you an advantage when it comes to putting an offer in on the property. In addition, your property should be on the market, ideally holding an offer, and you should be ready to go.
Make yourself aware of your estate agents methods:
Some estate agents are completely against gazumping and will not support this practice. Some estate agents will even offer you the opportunity to sign a contract that bans gazumping and other unethical property market practice.
What are Sealed Bids?
If there are lots of people interested in the property and the seller receives a lot of interest and numerous offers on the property, an estate agent often asks all interested buyers to submit a sealed bid or ‘best and final’ offer by a certain deadline.
When making your sealed bid, be careful not to pay over-the-odds for the property, but be mindful that somebody could make an offer higher than yours. Doing some research on its value and similar house prices can help when it comes to making a realistic offer that is likely to be accepted.
Other terms associated with ‘gazumping’
“Gazundering”– The term “Gazundering” refers to a buyer who lowers their offer on a sale price that has already been agreed, just before the contract is signed. Gazundering can cause an equal amount of anxiety and worry, particularly when a seller is relying on a certain amount of income from their property in order to purchase their new home.