What is gazumping and how can I stop it happening to me?
Sian Hiatt, Sales Manager, talks us through what gazumping is, what the consequences are if a buyer finds themselves being gazumped, and what buyers can do to try to minimise the risk of being gazumped in the first place...
Have you heard of the term ‘gazumping’? Perhaps you’ve overheard someone use the phrase “Oh no, I’ve been gazumped!”? It’s an unusual word - a little like something you may expect to hear in the middle of a wizards spell.
The word gazumping is often used within the real estate industry and we can consider it a word that relates to some unwanted bad news as it’s the last thing a prospective buyer wants to hear after they’ve put in an offer on a property and had it accepted - only to then be told that their offer has been ‘gazumped’ and the seller has accepted a new higher offer from another buyer.
So, what exactly is gazumping?
Let’s use a scenario to describe exactly what gazumping is and how it typically pans out:
A young couple find a property they fall in love with and decide to put in an offer. Following some quick negotiating back and forth, the buyer and seller come to an agreed price and the seller accepts their offer.
Before the sale is finalised, the seller receives a new offer from a second couple who are also interested in the property - only this offer is higher than the first offer that the seller accepted from the first couple.
The seller, naturally, wants to maximise the amount they receive from the sale of their property, so they decide to turn away the original lower offer that they had accepted from the first couple, instead accepting the new higher offer from the second couple.
The first couple have experienced first hand what gazumping is.
Is gazumping illegal?
Sadly, gazumping in Wales and England is not illegal. This is due to the fact that a simple agreement to buy or sell a property is not legally binding until contracts are written and exchanged. Until the exchange occurs and the sale is finalised, both the buyer and the seller have the option to remove themselves from the deal.
Estate agents are legally obliged to pass each and every offer onto the seller, even if the seller has already accepted an earlier offer. The seller cannot be forced to stick to the initial offer unless written contracts have been exchanged, and likewise, the buyer cannot be forced to commit to the purchase. The exchange of contracts is what legally seals the deal.
Are the any other consequences to being gazumped?
Gazumping usually occurs early enough for there to be limited consequences for the original bidders - it typically means facing disappointment and having to decide whether to get involved in a bidding war or turn their attention towards finding another property.
However, some buyers are faced with more than just disappointment. If the gazumping takes place further down the line, it could prove to be a costly affair as any non-refundable costs that have been paid, such as surveys, conveyancing services and mortgage valuations, are basically lost.
Can you stop yourself from being gazumped?
Being gazumped isn’t a nice thing to experience, and while it’s not possible to entirely stop yourself from ever experiencing it, there are a few things you can do to minimise the chances of it happening to you.
Act quickly and ensure the property is removed from the market
As soon as your offer is accepted you need to kick things into gear as soon as possible. It’s not easy to having everything at the ready immediately as the home buying process can be time consuming with unexpected complications or hold ups (check out our buying guide for the lowdown on what needs to be done from start to finish). However, being aware of the process and completing necessary tasks at the earliest opportunity, such as the arranging of surveys, conveyancing or finalising the sale of your own home, will mean there is less time to get gazumped.
Furthermore, it can certainly help if you ask the seller to remove the home from the property market once they accept the offer. They aren’t obligated to do so, but if they can see your intent to purchase the property then sellers are typically happy to agree to this request. It’ll mean house hunters scouting the market will no longer become aware of the properties availability, leading to a much reduced risk of being gazumped.
Obtain your mortgage in principal
Having a mortgage in principle at the ready can also help as it’ll prove to the sellers that the likelihood of hitting a financial stumbling block is limited - being able to complete the sale quickly will act as a good sign to the seller meaning they will be less likely to hold things up and change their mind if another slightly higher offer comes in, though this may not be the case if a new offer is considerably higher, of course.
If you’re keen to learn more about the mortgage process, have a read through our mortgage guide.
Request a lock-in agreement and consider insurance
A lock-in agreement can be handy as it can stipulate that that seller will not entertain any other offers for a fixed period of time. As a buyer, this will give you some bonus time to tie up a few loose-ends before proceeding with the purchase without the fear or risk of being gazumped.
If your fear of being gazumped is particularly high, there are insurance options that can at least help you cover any losses. Insurance won’t prevent gazumping from ever happening, but it will at least minimise the financial risks.
Looking for your dream home in Cardiff? Our friendly and knowledgable sales team here at CPS Homes are ready get involved and make it a reality! To learn more about how we can help, get in touch by calling 02920 668585, e-mail enquiries@cpshomes.co.uk or pop into one of our three Cardiff branches.
