If you’re in the process of buying or selling a house or flat, gazumping is something that could affect you. In this article, we explain what gazumping is and how to try and prevent it from happening to you.
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What does Gazumping Mean?
Gazumping happens when a seller has already accepted an offer on a property from a buyer, only for another buyer to come along and make a higher offer. In such a scenario, the original buyer usually loses out on the house they wanted, and the gazumper ends up buying it.
Both the seller and the buyer can be affected by gazumping; the original buyer has to start their house search again, while the seller has to restart the selling process with a different buyer.
Gazundering is the opposite of gazumping; it is when the buyer reduces their offer on a property to less than the amount that the seller had accepted.
Gazanging is another possible outcome that can happen instead of gazumping. This is when the seller decides not to sell their property at all. It is thought that the term gazump originates from a Yiddish word – gazumph – meaning to cheat.
When does Gazumping Happen?
Gazumping can happen at any stage of buying or selling a property, but it is more likely to happen in a seller’s market.
When there are more eager buyers than available homes for sale, when there is a property shortage, or when house prices are increasing, it increases the chances of gazumping.
The longer the transaction takes, the more likely it is that you will be gazumped.
What’s the Big Problem with Gazumping?
Gazumping can be a major issue for house buyers, causing them distress and stress. They may have found the home of their dreams and made plans for it, only to have to start from scratch and search for a new house.
It should not be overlooked that gazumping can also be a problem for sellers. Gazumpers may offer more than they can actually afford or more than the house is worth, so there is a risk that the sale could fall through when they are unable to secure the funds.
Buyers who gazump may be unscrupulous, making a higher offer on the house only to drop it at the last minute – in other words, they could end up gazundering.
Gazumping is costly for everyone involved. Money and time might have already been spent on surveys, mortgage application, and solicitors’ fees. When gazumping takes place, a considerable amount of money can be lost.
Is Gazumping Legal or Illegal?
Gazumping is not illegal. It is quite valid for buyers to gazump and for sellers to accept offers from gazumpers over the original offer.
Legally speaking, a property is not sold until the contract of sale is legally exchanged. Verbal agreements or spoken agreements between buyer and seller are not legally binding.
Gazumping is permissible under English law in England and Wales. Gazumping is not as common in Scotland due to stricter laws of house buying and selling.
Estate Agents and Gazumping
Some people believe that some estate agents actually promote gazumping. It is easy to see why they might do that: estate agents who collect a commission whenever they sell a house are likely to benefit if they find a gazumper who is willing to pay more than what was formerly agreed.
Most estate agents, however, will claim that they do not support gazumping and may even have a policy against it.
The situation can be complicated. Estate agents are unable to prevent gazumping even if they want to. This is because, after a sale has been agreed, if another offer is submitted from another buyer they are obliged to disclose it to the seller.
Therefore, regardless of whether they like it or not, an estate agent could be implicated in gazumping.
How to Stop Gazumping if you are Buying
- Make a strong offer from the start. It might be tempting to try and get a large discount, but the better your offer price is, the less likely someone will be willing to beat it, and the less likely it will be worth the seller’s time to accept another one.
- Ask that the property be taken off the market once your offer is accepted. Request the agent to remove the property from their books and not to carry on with any more viewings. Try to make this a condition of your offer.
- The seller or the agent doesn’t have to agree to this, but if they do, it means it’s less likely you’ll be gazumped. You could also ask the seller to enter into a lock-in agreement or exclusivity agreement, where they agree not to negotiate with another potential buyer. Although they may not be willing to do this, it doesn’t guarantee the property will be sold to you. It’s best to get legal advice about the positives and negatives of doing this.
- Being a cash buyer is another option. If you have a property to sell, do it before you look for a place to buy. Sellers are more likely to consider a cash buyer as a priority buyer.
- Have your finances ready, such as a mortgage in principle, in advance. Use a bank or building society that can make mortgage offers and process mortgages quickly. If you have the money ready, sellers are more likely to stick with your offer.
- Choose a solicitor or conveyancer that is ready to act quickly. Look for someone who has a reputation for doing conveyancing quickly.
- Move as fast as you can. The quicker contracts are exchanged, the less chance there is of you being gazumped. Sometimes, gazumping can occur not because another buyer makes a higher offer but because the seller needs a faster sale and decides to accept a different offer after accepting yours.
- Agree on a target date for exchanging contracts and for legal completion, and work towards it. Keep in regular contact with the estate agent, solicitor, bank or building society, and sort out any issues quickly. If you can, stay in contact with the seller, too – the more they know about you, the less likely they are to accept another offer.
- You can also get an insurance policy, often called Home Buyers Protection Insurance, to help reduce the problems gazumping can cause. Although it can’t stop gazumping from happening, it might refund your costs if you are gazumped.
How to Stop Gazumping if you are Selling
- Gazumping is an issue for both buyers and sellers. While a gazumper’s offer may be attractive, it can lead to extra costs, delays, and possibly even the collapse of the sale.
- To avoid this, pricing the property correctly from the start will generate the most interest and attract serious buyers. When selecting the buyer, choose the best one for you, not necessarily the one with the highest offer.
- Once a sale is agreed, get your estate agent to remove the property from the market. Do not allow any further viewings.
- Speed is key. Select a solicitor or conveyancer who can act quickly and answer any queries promptly. Don’t hesitate to ‘chase up’ the buyer, estate agent and solicitor. The faster contracts are exchanged, the less chance there is for a gazumper to interfere.
- You can opt for an alternative method of sale, such as auctioning a house or a cash house-buying service. This will reduce the risk of gazumping.
What to Do If You are Gazumped
If you’ve been gazumped as a buyer, there are a few things you can do. Start by asking the seller to stick to your offer. Focus on your strengths – such as your readiness to move – and appeal to their better nature.
Remind them how much you love their house and how you want it to be your home.
Think about whether it’s worth increasing your offer to outbid the gazumper. This might be cheaper than going back to square one. Consider how much you’ve already spent on the property and if you can actually afford to pay more.
When making a decision, try to stay rational and not let your emotions take over.
If you’re the one being gazumped, keep in mind that increasing your offer could end up in a bidding war. This may just be used to get the gazumper to up their offer – and you still won’t get the house.
On the other hand, if you’re the seller in a gazumping situation, consider whether the higher offer from the gazumper is actually worth it?
Look at what you’ve already spent, as well as the impact it could have on your future plans. It could be that the original offer was better, and it makes more sense to reject the gazumper.
Gazumping isn’t really fair or ethical, but it does happen and is not illegal. So it pays to know what your options are.
Do you want to know how much a professional homebuyer can pay for your property? Reach out to Property Saviour’s friendly team today by calling us. Alternatively, you can fill out our online enquiry form and get a free, no-obligation cash offer.
How long does it take to sell a house with a cash buyer?
Any ‘ready, willing and able’ cash buyer should be able to exchange contracts within 10 days – or quicker.
Completion can then take place either simultaneously or a week later.
Property Saviour will also pay £1,500 towards your legal fees.
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