“We’ve just experienced Gazumping! Our seller pulled out on the day of exchange. It cost us £1,800 in fees and we had to arrange temporary accommodation at the last minute.”
This sad story, as told to BBC News, can be more common in a heating property market. The couple in question, from Eastbourne, were victims of something called gazumping. We look at how this works in our latest blog.
What happens when you are ‘gazumped’
Gazumping happens when a house seller having already accepted an offer for their property, accepts an improved offer from another buyer. This results in a failed house chain which cannot be completed until a new buyer is found.
People buying a new house are often tempted to crack open the bubbly to celebrate before the deal is closed. But, with gazumping, rejection can come at the last minute.
As well as being a cruel blow to the house-buyers, gazumping can hit you in the wallet. And it has a human cost too.
Andrew, the seller quoted earlier in the BBC News report, said: “My wife was four months pregnant at the time and we had to move out of our previous home as we didn’t want to lose our sale.”
In common with other people who were gazumped, Andrew and his partner had no comeback on the money they had spent.
In this case, contracts for the sale had not been exchanged, although the couple had paid for two surveys. “The whole system is a joke and needs changing,” he told the BBC.
The costs of losing out
When you are gazumped, you lose more than your dream property. Money you spend on searches, property surveys, solicitors and and fees paid in applying for a mortgage are often wasted.
Nick, a first-time home buyer, told the BBC: “We had spent 20 years saving around £40,000 for a deposit. And to see 10% of that money go down the drain was heart-breaking.“We were then trapped on the rental market for three years until we could rebuild our savings, while watching house prices rise.”
Gazumping is still legal in England and Wales. It can happen because an agreement to buy or sell a house is not legally binding until contracts are both written and exchanged. Verbal agreements that may have been made before can count for nothing.
As removals website getamover.co.uk points out in an article: “Estate agents are legally obligated to pass every offer they receive on to the seller. This effectively means it is against the law for them to refuse when a buyer asks them to submit an offer. Even if the seller has already accepted an offer earlier.”
Gazumping in house sales
So what can you do to avoid gazumping when you buy – or sell – a home? Property expert, TV’s Phil Spencer, advises people to get the deal done as quick as possible. This is the best chance you have of holding on to the sale. He told the Daily Mail in 2019 “The longer something takes, the greater the chance that someone’s personal situation may change. “They’ll get a new job, they’ll fall out with their partner, have a baby – those major changes in life can have an impact on your decision to buy or sell a property.”
Phil added: “So what can you do? Speed the deal up and get it done quickly.”
In this property guru’s view, gazumping is something that happens when the property market climbs steeply.
Property website Zoopla says one trick to avoiding gazumping is to be prepared. In a recent article, writer Esther Shaw recommends getting your finances sorted and a mortgage agreement “in principle. as soon as possible” “This is essentially a letter from a lender setting out how much they would be willing to lend, based on an initial assessment of your circumstances,” she says.
Zoopla and other experts advise buyers to ask their seller to take the property off the market as quickly as possible. This might stop another buyer coming along and offering a higher price.
To keep things moving along as fast as possible, keep in touch with your mortgage company and solicitor regularly. Be sure to respond to your solicitors enquiries as the sale progresses and don’t procrastinate. Read, sign and return paperwork as quickly as you can.
Lock out agreements
Another thing to consider is a “lock-out agreement”. This is a contract between the seller and the buyer giving the buyer the exclusive right to buy the property within a period.
“Of course, the seller has to be willing to sign this,” says an article by the Home Owners’ Alliance. “But it may help to prove to them that you’re serious about wanting the property. And it will appeal to sellers that have had a sale fall through before or want to move fast.”
When it does happen gazumping can be costly, a nasty surprise and one of the last things you need when you are buying (or selling) a house.
However, this can often be avoided by keeping the deal moving when you are selling.
You can find out a great deal more about how to achieve a quick house sale in our ultimate guide to resolving a broken house chain.
Has this blog helped you understand gazumping better? Let us know by leaving us comment in the space below.