If you are buying a property, or about to go through the process of doing so, you have likely heard of the term gazumping. But what exactly does it mean? If you are a buyer, making sure that you know what gazumping is key, so you are aware of the ways it may set you back, as well as what you can do to avoid it.
What is gazumping?
The act of gazumping is when another buyer puts in a higher offer on the property you are currently in the process of buying and the seller accepts this last-minute offer instead.
For anyone who has gone through the experience of having their offer accepted by a seller, only to have it suddenly rejected due to another buyer’s higher offer, can attest it is a difficult situation to be in.
What happens if I am gazumped?
For the majority of buyers who find themselves being gazumped by another buyer offer, there are really only two options.
The first is to make a higher offer than the other buyer who has gazumped you. This may mean having to pay a significant amount more, which may be out of your property budget.
The alternative, and for many there is no other choice, but to start all over again and carry out a new property search.
Is gazumping illegal?
No, as unpleasant as it is for buyers to go through, it is not illegal under English law. The property agreement only becomes legally binding once contracts have been exchanged, meaning that gazumping is effectively exempt.
You can see on a variety of property listings online are listed as ‘Sold STC’ meaning an offer has been received and accepted, but the sale is ‘subject to contracts’ meaning contracts have not come into exchange yet.
What are the consequences of gazumping?
Apart from the main consequence – losing the property you were buying- other negatives include the high costs accumulated, as gazumping usually occurs later on in the property process. Buyers have usually already spent a considerable amount on surveys and paying a conveyancer, as well as arranging a mortgage.
When can gazumping happen?
Unfortunately, gazumping can take place at any time prior to contracts being exchanged between two parties.
The main reason gazumping occurs is, as previously mentioned, is because another buyer has made a higher bid than you. However, in a small number of cases, the reason could be down to timing issues. For example, if the property buying process is going too slowly (such as the conveyancing survey taking too long to complete) then the seller may choose another buyer who can move at a quicker rate.
How to avoid being gazumped
Here are the main ways you can reduce the risk of being gazumped:
- Get the property taken off the market
- Take out specialist insurance
- Buy at auction
- Move things quickly
Get the property taken off the market
When your offer is accepted by the seller, make sure you ask the seller to remove the property off the market. Ensure this been done in writing as otherwise, it will not be legally binding.
The same applies to estate agents listing the property. Ask them to remove signs from outside the house as well as removing the listing online.
Take out specialist insurance
If a seller decides to pick a last-minute higher offer from someone else and you do not want to outbid them, there is little you can do other than insure yourself. You can purchase home buyer protection insurance so that you can rest assured you can claim back things such as property surveys or conveyancing fees if need be.
Buy at auction
If you want to avoid the problem of gazumping outright, then consider buying a property at auction. However, make sure you are fully aware of how the process works, as it also comes with its own set of risks too.
Move things quickly
To reduce the risk of gazumping, it is in your best interest to make sure the process is moving as speedily as possible. What do we mean by this? Things such as making sure you are in very regular contact with your mortgage broker and conveyancing solicitors, as well as always responding quickly to information requests. You should also ensure forms are signed and returned promptly too.