The term Gazumping is used to describe a situation, whereby a seller accepts a better offer from another buyer before they have finished the sale of the property with someone else. From time to time we hear people saying that gazumping is illegal, though unfortunately this is not the case.
Gazumping, whether it’s morally acceptable or not, isn’t a crime in the UK and it’s not uncommon for it to find its way into the property buying process. This is because an agreement to buy or sell a property doesn’t become legally binding until written contracts are exchanged by the lawyers. Until these have been signed, you are working purely off a spoken agreement.
Gazumping can be a difficult and stressful thing for First Time Buyers to experience. One minute you’re finalising the details to take on your first ever home, the next that’s all been taken away and you’re back to square one. You may also be part of a chain that breaks and, as a result, your moving date has to be moved back.
It can be even more painful if you lose money through this process too. This is because you can sometimes be left out of pocket by non-refundable survey costs, conveyancing fees and mortgage arrangement fees.
As we mentioned, an agreement to buy or sell a property doesn’t become legally binding until written contracts are exchanged. Unfortunately, there can be delays of up to several weeks between a seller accepting your offer and the exchange of contracts taking place. This can be due to having a property survey undertaken, your conveyancer carrying out the necessary searches and you receive your mortgage offer.
Within this period, other First Time Buyers may make a better offer on the property which the estate agent has to pass on to the seller. However, these preferable offers are not always better in terms of financial value. They may offer a faster sale or not have the pressure of a chain. Hence why the term ‘gazumping’ covers any preferable offer the seller decides to accept.
Unfortunately, there are certain things that won’t happen until you have decided to make an offer, namely the property survey, conveyancer searches and mortgage offer. However, you can reduce the time between making an offer and the contract exchange.
Ways to do this include…
There are also a couple of tactics you could use to help add more security to the deal ahead of the exchange of contracts. Firstly, as part of your offer, ask the seller to take the property off the market as this reduces the risk of other people seeing the property. There is no obligation for them to agree, but it isn’t uncommon for them to respect this request, especially if they’ve struggled to receive offers in the first place.
Secondly, you could try to put in place a Lock-in Agreement which sees both parties put up a deposit as part of a binding agreement. If either party attempts to change the deal or back out completely then the other side takes their deposit. These arrangements can incur costs such as legal fees to set it up, but you might feel it is worth the cost for the security.
Finally, there are options to take out insurance to protect yourself against gazumping. These policies agree to pay you a set fee in the event of being gazumped.