Gazumping is one of those terms that exists only within the property industry. It tends to come up during the purchase of a property, and is a term many buyers dread. Once you’ve had an offer accepted you may be tempted to crack open the bubbly and start celebrating.
7th February, 2022
Gazumping is one of those terms that exists only within the property industry. It tends to come up during the purchase of a property, and is a term many buyers dread. Once you’ve had an offer accepted you may be tempted to crack open the bubbly and start celebrating. Unfortunately there are still things that can go wrong and prevent your purchase from progressing to completion. Gazumping is one of them. If you’re buying or selling a house then gazumping is something that could happen to you.
We’ve written this jargon-busting guide to give you the lowdown on Gazumping. We’ll explain what gazumping means, how and when it can happen, why gazumping is bad for buyers, and whether gazumping is legal or illegal. We’ll also give you some handy tips on how you can avoid being gazumped, and what to do if you find yourself in a situation where you’ve been gazumped.
If you’re looking for some specific advice such as whether or not gazumping is illegal, or what to do if you’ve been gazumped, then use the menu below to navigate through the article more easily. Otherwise, read on for everything you need to know about gazumping.
Gazumping is a practice whereby a property seller accepts an offer on their house, and then rejects it later in favour of a better offer from another buyer. This is understandably very frustrating for the initial buyer. It pushes their property search back to square one and could create problems with their house sale if they are in a property chain. We’ve heard countless horror stories from prospective buyers who’ve lost out on their dream home because they’ve been gazumped.
So why does gazumping happen? Typically it comes down to price. The second buyer comes in with a higher offer and the vendor is tempted to get more money for their property. After all, the costs of selling a house in the UK can be substantial. Price isn’t always the reason though. A seller may also wish to accept an offer if the buyer is in a more proceedable position and able to complete the purchase more quickly. Selling a house can take a long time, and if the vendor wants to sell their house fast then a buyer who can move more quickly, potentially as a cash buyer, then it can be an attractive option.
When does Gazumping happen?
Gazumping can happen at any time during the sale process before contracts have been exchanged. This is when the sale of the property becomes legally binding. So gazumping can happen at any stage of the conveyancing process whilst the property is under offer.
This is why gazumping is so bad for buyers. They can spend money on surveys and searches, pay their conveyancing solicitor, and spend time getting a mortgage arranged and agreed, only to have the purchase pulled at the last minute. This can mean that they’re left at a loose end, with a fair amount of wasted money.
Is Gazumping Illegal?
Gazumping is not illegal in the UK. Any property sale is not legally binding until the exchange of contracts. This means that technically the house seller can choose to accept another offer for any reason they choose. Though typically it’s based on price or speed.
Whilst this can be a threat for buyers to move more quickly, it works both ways. The opposite of gazumping is gazundering. This happens where the buyer offers a lower amount later in the house sale process. If a seller is proving to be slow or uncooperative, it’s not uncommon for buyers to threaten to reduce their offer. If the seller’s property had little interest to begin with, this can help them to take the process more seriously, pull their finger out, and progress towards a faster house sale.
How common is Gazumping?
Market Financial Solutions (MFS) conducted a report called ‘Gazumped Britain’ in which they showed the results of a survey carried out on 750 adults in the UK property market. Their findings highlighted that gazumping is common, costly, and widely accepted amongst Britons.
Specifically, they found that around a third (31%) of UK homeowners had previously lost out on a property purchase as a result of being gazumped. Two fifths (39%) have had to pay fees on a property purchase that did not end up completing, and 43% of homeowners would gazump another buyer if it meant that they could successfully complete on a property purchase.
Despite the willingness to gazump others, the consensus is that there’s need for more regulation to prevent gazumping. Two thirds of UK homeowners think that buying a property has become more difficult as a result of increased competition. 80% of homeowners are in favour of regulations to ban Gazumping in the UK.
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Despite how common gazumping is, especially in a property market that’s as competitive as the UK property market is at the moment, there are some steps that you can take to prevent gazumping from happening to you.
Make sure that you’re in a position to move quickly after having an offer accepted. The longer your target property remains under offer, the more likely you are to end up being gazumped. To make sure you can move quickly once your offer is accepted, get your mortgage in principle agreed before you make your offer, get a conveyancing solicitor lined up, and get all the documentation in place that you will need to proceed to exchange.
You should keep things progressing once your offer has been accepted. The best way to do this is to keep in contact with your solicitor, the vendor and your mortgage broker, and have regular check-ins to make sure that the sale is progressing. Make sure that you’re responding to enquiries and providing information quickly and accurately.
Get the property taken off the market
It may not always be possible, but it’s worth asking the vendor to take the property off the market. This could take the form of having a ‘Sold’ sign outside the property, or having it removed from the major portals like Rightmove and Zoopla.
If the property is no longer being marketed whilst it’s under offer then you’re far less likely to end up getting gazumped. You might have more luck getting the vendor to remove the property from the market if you’re able to offer something in return. For example a commitment to exchange within x number of days from receiving your property searches back, or ordering a survey within a certain timeframe. Making commitments like this helps to show the vendor your commitment to progressing the sale quickly and also makes it less likely that they’ll entertain other buyers.
Build a relationship with the vendor
Estate agents and solicitors tend to prefer that buyers and sellers don’t stay in contact and they manage the communication between the two parties. However, there’s nothing to say that you can’t get in touch with the vendor to express how excited you are about the property.
It tends to work well if you drop a thank you card to the vendor or ask for their email address so you can stay in contact with them. This helps to make them view you as more of a human rather than just an offer, and increases the chance that they’ll think twice before accepting another offer over yours and leaving you in a position whereby you’ve been gazumped.
Take out Home Buyers Protection Insurance
Home buyers protection insurance can protect you against the costs you incur when you’ve been gazumped. It can’t stop you from another buyer actually gazumping you and coming in with a higher offer, nor can it stop the seller from accepting another offer. However, it can protect you from losing out on the money you’ve spent on the purchase prior to exchange. It means you could recoup the costs you’ve incurred on things like searches, surveys and solicitors fees. So whilst you still may lose your dream property, you don’t end up significantly out of pocket for the privilege.
What to do if you have been Gazumped
If you’ve been gazumped on a property that you’re purchasing then you have two options, you can either increase your offer or you can highlight the most attractive aspects of your offer and position to the seller. If you’re increasing your offer then you should be aware that the other buyer may come back with a second offer, and you could become embroiled in a bidding war. Make sure that you’re in a secure enough financial position to handle this. If you decide to try to sell your position, highlight everything that could be attractive to the buyer. Include your proof of funds, how quickly you are prepared to complete and how much you have already committed to the purchase.
If gazumping has happened to someone else in your property chain and it means that your buyer has pulled out, you need someone who can move quickly to buy your property. If you need someone to buy your house fast for cash then consider a cash house buyer like SmoothSale. We can buy your house for cash in as little as seven days. There are no fees to pay and we’ll even cover your legal fees. To find out more give us a call on 0800 368 8952 or get a cash offer today.
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What Are the Alternatives to Gazumping?
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