Gazumping is a relatively modern phenomenon and yet for a number of years there has been talk of laws being changed to crackdown on the practice, which can be devastating for innocent people. In all likelihood, however, there will always be legal loopholes which allow the practice to continue, and certainly it is still a genuine concern for vulnerable house buyers, with a recent survey claiming 30% of house buyers have been affected by gazumping in the last decade.
Undoubtedly, gazumping is one of the most frustrating, upsetting and expensive setbacks you are ever likely to encounter, but there are ways to minimise the risk of it happening to you, or at least minimising the effect it can have.
What is gazumping?
Gazumping is where a seller accepts an offer from you for a property, but at a later stage accepts a higher offer from another party, rendering your offer void and meaning your property deal falls through. You may be in a position to make a counter-offer immediately, but in most cases you are back to square one and a lot of time and potentially money has been wasted. There is also the impact that losing your purchase can have to the parties in your chain, and can even result in you losing your buyer on your related sale.
Unfortunately, gazumping is not illegal in England and Wales, because you have only made a verbal agreement with the seller, which is not binding. The transaction only becomes binding when contracts have been exchanged, which comes quite late in the process, after surveys, conveyancing fees, searches and mortgage arrangement fees have been paid.
How can you reduce the risk of being gazumped?
- Organisation: In simple terms, you can act to minimise the time that the seller has available to receive or accept offers better than yours. This means you should ‘get your ducks in a row’. In other words, you can get a mortgage ‘agreement in principle’ arranged, so you know you have money available at least up to a certain price, making you more financially attractive to a seller. You can also get your solicitor appointed and provide them with the necessary personal information they need, such as ID documents and proof of address, so that a file can be opened upon your confirmation of a sale being agreed. You can also get your property on the market – if you are selling one – and you can even have it ‘sold’ if that is possible and practical. This all speeds up the process and puts you in a stronger position to complete the sale quickly.
- Get the property off the market: Unfortunately, after you have agreed a sale with a seller, they and the estate agent are not legally obliged to take the property off the market. However, you can request in writing that they do, and if they refuse you can question their motives. This also shows that you are a serious buyer who wants to move quickly, and this is often attractive to a seller. If the property is not listed online or has no boards up outside, it is less likely to receive further offers.
- Be alert and act quickly: The sale process can be slow, but you can make sure you respond quickly to all queries for information, and you can keep ringing your mortgage broker and solicitor to push the sale along. In short, don’t be the cause of any delays.
- Be a good buyer: This may sound a little idealistic, but if you demonstrate you are a serious buyer and an honest person, this may help if a seller has a crisis of conscience further down the line if/when they receive another offer. Of course, this is not guaranteed but it may appeal to their better nature if you are amiable and friendly, open and co-operative. Make the sale easy and pleasant and it is more likely to work in your favour.
- Exclusivity/Reservation Agreement: You can specifically ask your seller to sign a ‘lock-out agreement’, meaning they can’t seek or accept a better offer, at least for a certain period of time. This then gives you breathing space and the onus is on you then to complete the sale. Some sellers may be reluctant to sign these and may even ask for a fee/initial deposit, but in other cases a seller sees it as a serious commitment of intent and will co-operate, because they also want a quick sale. In all cases, take legal advice on how to proceed with this.
- Buy through certain estate agents: Some estate agents have a policy on gazumping whereby they insist that a seller signs an agreement to turn down any subsequent offers once one is accepted. You can research which estate agents have these and try to buy through these ones only. Of course, this will most likely restrict which properties are available to you.
- Insurance: While this won’t prevent you being gazumped, a Home Buyers Protection Insurance policy will minimise your financial losses. This policy will cover you against upfront costs such as legal costs, surveys, mortgage costs etc in the event that the purchase falls through.
You can speak to a conveyancing specialist about all these issues as soon as you are thinking about entering the property market to buy and/or sell a property. Taking note of the actions listed in this article in isolation, or ideally together, will help to protect you from the effects of gazumping.
For expert property advice, contact our expert conveyancing team in Yorkshire today.
