What is gazumping?

If you’re a first-time buyer in search of your dream home, it’s important to be aware of gazumping and how to avoid it. Here’s what you need to know.

If you’re a first-time buyer in search of your dream home, it’s important to be aware of gazumping and how to avoid it. Here’s what you need to know.

Mark Gordon
From the Mortgages team
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Posted 22 FEBRUARY 2021

What is gazumping?

Gazumping is when, despite having verbally accepted your offer to buy their property, the seller accepts another (often more appealing) offer in its place, before the sale is complete.  

Is gazumping legal?

It seems extremely unfair, especially considering it could result in you losing hundreds of pounds in non-refundable conveyancing and survey fees but, yes, gazumping is perfectly legal.

There’s a number of reasons for this. Firstly, it’s because a verbal agreement between the buyer and seller isn’t legally binding. Only once the written contracts have been exchanged and signed by both parties is the agreement set in stone.

Unfortunately, the house-buying process can be slow going, often leaving a good few weeks between the verbal acceptance of an offer to buy and the actual signing of the contracts.

The reality is that, during this time, you’ll have probably had a property survey done, given your conveyancer the go-ahead to start doing their part and applied for a mortgage with your chosen mortgage provider.

In other words, you’ll have probably already spent a sizeable sum of money, only to learn that your dream home is no longer going to be yours.

Gazumping is less common in Scotland than in the rest of the UK, because the property-buying process is different. Properties are often marketed by solicitor estate agents, and once they accept an offer on behalf of a client they can’t accept another offer. Sellers can switch solicitors, however, and not all properties are marketed by solicitors, so gazumping still happens.

Why does gazumping happen?

Usually, it’s because the seller has received a more attractive offer from another buyer. This is common when the demand for a property is high or the property market is strong in general. However, a better offer isn’t the only reason buyers might be gazumped.

Gazumping can also happen if the seller is keen for a quick sale. So, if they’re approached by another interested party who already has a mortgage offer in place, whereas you don’t, they might be persuaded to accept that offer despite having already verbally accepted yours.

Be wary though. Sometimes, a seller and their agent will attempt to make you think you’re about to be gazumped, in an effort to see how much extra money you’re willing to pay for the property. Is gazumping illegal in this respect? Surprisingly not. Unethical, yes.

How to avoid gazumping

To save yourself disappointment and wasted money, you’ll need to do everything in your power to avoid being gazumped by a seller. Here are some tips:

Don’t delay
If you’re serious about buying a property, act quickly once you’ve decided to put in an offer. Make sure you have all the necessary documentation and contacts to hand, including a property surveyor and a conveyancing solicitor. Consider giving these contacts advanced warning that you’re likely to use their services in the near future.

Get a ‘mortgage in principle’
A ‘mortgage in principle’ is not an official mortgage offer. However, it can prove to the seller that you’re a serious buyer. It can also speed up the process once you’re ready to apply for an actual mortgage.

Get insured
Home buyer protection insurance is a worthwhile consideration for buyers and can protect you from the financial pitfalls of gazumping. If you do fall victim to the practice of gazumping, this type of insurance makes it possible for you to claim back a certain portion of your survey and conveyancing fees.

It’s advisable to regularly communicate your progress to the seller. By keeping them up-to-date, they may be less inclined to accept another offer.

Ask the seller to take the property off the market
They’re not obliged to do this, but it won’t hurt to ask. If the property isn’t being advertised, the chances of a new offer coming through are pretty slim.

Sign a ‘lock out agreement’
Essentially, a ‘lock out agreement’ is a contract that grants the buyer exclusive rights to purchase the property within an agreed time frame. As long as the requirements of the contract are met, gazumping shouldn’t be a possibility. Like taking the property off the market, the seller isn’t obliged to agree to this – but it’s worth a try.

What to do if you’ve been gazumped

If you find out you’ve been gazumped, all is not lost. You’ll have the option to make a higher counter offer if your budget allows. Just be careful not to make an impulsive decision in the heat of the moment. Take the time to review your finances and consider your options.

What is gazundering?

Gazundering is when a buyer lowers their offer at the very last minute. This is hugely frustrating for sellers in a chain who might feel they need to accept the lower offer or lose the property they’ve made an offer on.

Although gazundering is legal, it’s not exactly moral. The only justifications for lowering an offer are because the buyer has discovered something unfavourable about the property or if prices have fallen significantly.

Like gazumping, gazundering is less common in Scotland because solicitors acting on behalf of clients can’t usually lower an offer. However, buyers can always find another solicitor if they’re determined to gazunder.

How to avoid gazundering

  • Set the right price for your property in the first place and you’re less likely to attract buyers who might try to whittle it down.
  • Get problems fixed before the buyer’s survey, to avoid the buyer trying to reduce the price at the last minute.
  • Move quickly towards exchange, giving the buyer less time to renegotiate the price.

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