A POTENTIALLY expensive and disappointing practice that all hopeful homebuyers should be aware of is gazumping. Purchasing a property can often be a long process, and it doesn’t help to get close to the finish line, only to have your chosen home snatched out from under your nose by another buyer.
We’ll explain what it is, how to avoid it and how to protect yourself financially.
WHAT IS GAZUMPING?
Gazumping (noun): the act of accepting an offer on a property only to withdraw it in favour of a higher offer.
Gazumping can occur at any point during the house-buying process, but it mostly happens after your offer has been accepted and you’re in the process of arranging contracts.
It’s important to be aware that once you have an offer accepted, the property is still technically on the market until contracts are exchanged. This period can often take weeks or even months, during which time other buyers can make higher offers, potentially resulting in your offer being withdrawn.
As long as this takes place before contracts have been exchanged, it’s totally legal, but very inconvenient for you, the original buyer. It can also be costly as you may have already paid hundreds, even thousands of pounds for surveys, conveyancing and mortgage applications.
HOW COMMON IS GAZUMPING?
Unfortunately, gazumping is becoming increasingly common in the current housing market. A recent report found that 1 in 7 buyers have been gazumped in the last 12 months, with the average cost of being gazumped totalling £2,357.
The research also found that London was the worst place for gazumping, with 1 in 4 buyers being affected, while the North East was the best place to buy, with just 1 in 13 buyers being gazumped.
So, if you’re looking to buy a property in London, it’s important to be aware of the risks and take steps to avoid being caught out.
3 in 4 potential buyers say they would consider putting in a higher bid if they found their dream home and it was already under offer.
Take care if you are buying a repossessed house from an estate agent. Their client (the bank) will often make sure the property stays on the market and will encourage additional offers to be made.
HOW CAN YOU AVOID GAZUMPING?
The best way to avoid being gazumped is to exchange contracts as quickly as possible. If you’re in a chain, this can be difficult, but it’s worth trying to push things along as quickly as you can.
Before making an offer, make sure that:
- You have a Mortgage Agreement in Principle for the amount you’ll need to borrow
- You have appointed a conveyancing solicitor whom you trust to work swiftly
- You have all the necessary documentation together (IDs, payslips, bank statements, etc.) It is also helpful if you have already sold your home before buying a new one, to minimise the chain of transactions that can delay your purchase.
What to consider before making an offer on a house?
HOW CAN YOU PROTECT YOURSELF FROM GAZUMPING?
Since it’s difficult to avoid gazumping with certainty, it’s also sensible to protect yourself financially in case it happens to you.
Homebuyer protection insurance can reimburse the money you’ve already spent on solicitor fees, mortgage application fees, surveys and other costs if the seller decides not to move forward with the sale.
Another option is a ‘lockout agreement’, which involves both you and the seller paying a deposit and signing a contract to confirm that you have the exclusive right to buy the property for an agreed period. If the seller breaks the contract, they will forfeit their deposit.
IS GAZUMPING AGAINST THE LAW?
In short, no. Gazumping is not currently against the law in England and Wales, as long as it takes place before contracts have been exchanged.
This means that, unfortunately, there’s not much you can do if you find yourself in the situation where your offer has been accepted but then withdrawn in favour of a higher one.
You may be able to take legal action against the seller if they’ve misled you in some way, for example, by telling you that there are no other offers on the table when there were, but this can be difficult to prove.
To prevent gazumping in Scotland, an offer that is made and accepted on a property is legally binding. This means that, once an offer is accepted by the seller, they are not able to accept any other offers, regardless of how high they may be.
IS THERE ANYTHING YOU CAN DO ABOUT GAZUMPING?
It may not feel like it, but you do still have options if you are the victim of gazumping. If you have the budget and believe the property is worth more, you can try to outbid the other buyer.
You can also try to reason with the seller. Explain the difficult position this leaves you in and highlight any reasons they should continue with the sale to you, rather than starting again: perhaps you are close to completion or can promise a quicker transaction. There’s no guarantee that they’ll be convinced but you have nothing to lose by trying.
