What is it and how can you avoid it?
A POTENTIALLY expensive and disappointing practice that all hopeful homebuyers should be aware of is gazumping. Purchasing a property can sometimes 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 is when you make an offer on a property that the seller accepts but, later, they accept a different (usually higher) offer from another buyer, and you lose out.
By this time you have most likely applied for a mortgage and instructed a solicitor.
As long as this takes place before contracts have been exchanged, it’s totally legal, but very inconvenient for you. 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?
It’s becoming increasingly common due to high competition in the housing market. Recent data shows that 2 in 5 buyers say they have outbid a previously accepted offer in order to buy the home for themselves.
3 in 4 potential buyers say they would consider doing this if they found their dream home and it was already under offer.
HOW CAN YOU AVOID GAZUMPING?
While gazumping is, unfortunately, always a possibility, you can minimise the chances of it happening to you by being well prepared for the purchase. The quicker you can exchange contracts, the easier it is to avoid gazumping.
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.
HOW CAN YOU PROTECT YOURSELF FROM GAZUMPING?
Since it’s difficult to avoid gazumping with certainty, it seems 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 England and Wales:
Until contracts have been exchanged, the seller still has the legal right to change their mind and make an agreement with a different buyer for any reason.
To prevent gazumping in Scotland, an offer that is made and accepted on a property is legally binding.
IS THERE ANYTHING YOU CAN DO ABOUT BEING GAZUMPED?
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 simply outbid the other buyer to regain control.
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 closer to completion or can promise a quicker and smoother transaction.
There’s no guarantee that they’ll be convinced but you have nothing to lose by trying
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