With the housing market on the rise again, some sources are indicating that the practice of gazumping has returned with a vengeance, with one estate agent claiming that up to 7% of all failed housing transactions are due to the practice. So, what do you need to know about gazumping, can you guard against it and what should you do if it happens to you?
What is gazumping?
Gazumping is the term used to refer to the process of putting an offer in on a property which is already under offer. If you are ‘gazumped’ then you are the party who submitted the initial offer. If the subsequent – usually higher – offer is accepted, the people who gazumped you proceed with the house purchase, whilst you are left to begin the home buying process again, elsewhere.
Why is gazumping a bad thing?
Aside from the fact that you will have wasted your time on a property that will now ultimately be purchased by someone else, gazumping has the potential to cost you a significant amount of money. The offer from the second party can be accepted right up until the point you exchange contracts, which means you could have already incurred fees, such as legal fees, or paid for the surveys of the property.
Is gazumping always down to a later higher offer being accepted in favour of an earlier lower offer?
Usually this is the case but not always. Sellers may accept an offer at the same value, or even lower than your own if they feel as though that offer has a higher potential to succeed than yours. For example; if the second buyer offers the same amount but is a first time buyer with no property to sell and a mortgage already arranged, then the seller may proceed with that offer, rather than one from someone who has a property to sell before the sale can proceed.
Is there a way to stop gazumping? Shouldn’t it be illegal?!
Unfortunately not. Though discussed often, it is a practice that evolved as part of the way houses are sold. Without a significant change in that process – which seems unlikely – gazumping will continue.
So, how can I stop myself being gazumped?
There are several things you can do to reduce your chances of being gazumped. Firstly, you should aim to complete the deal as soon as possible, so consider getting a mortgage approved in principle before you submit an offer, and know who you want to use as your lawyer. Once you have had an offer accepted, always ask for the property to be removed from the market. Some sellers will be reluctant to do this, especially if they have accepted an offer lower than the asking price, but many will be happy to give you the optimum chance to complete the purchase. The only other thing you can do then is to make sure the deal moves as quickly as possible. Keep chasing your lawyer and the seller on paperwork, or have your broker do this for you!
Your property may be repossessed if you do not keep up repayments on your mortgage.
