Gazumping is a term used to describe a situation in which a seller of property accepts a verbal offer from a potential buyer but subsequently accepts an offer from another party. It can also be used to refer to a situation where the seller raises the asking price before formally signing a contract, after having verbally agreed a lower price.
Despite the practice often resulting in the potential buyer facing unrecoverable costs (such as survey costs, conveyancing fees, mortgage arrangement fees, etc.), gazumping is legal in England and Wales, as well as several other countries. This is because the exchange of contracts is something that takes place relatively late in the property buying process, following the property survey, the receipt of a mortgage offer, and so on, and as a result there is typically a delay of several weeks or even months between the verbal acceptance of the offer and it becoming legally binding.
During this period the seller may become tempted by a higher offer that is made for the property, although gazumping may not always be on the basis of financial matters. It can also refer to a situation in which a seller decides to reject an offer for some other reason, such as to accept another party’s offer who may be able to complete the purchase quicker, i.e. if they already have a mortgage offer in place, or are first-time buyers and so not part of a property ‘chain’.
Some techniques that can help to avoid gazumping include:
- Acting quickly to arrange the relevant surveys.
- Obtaining a ‘mortgage in principle’ (a conditional offer from a mortgage lender) before making an offer on a property.
- Finding a conveyancing solicitor and surveyor, and obtaining their quotes for work, in advance.
- Asking that the property be taken off the market as part of the offer.
- Securing a lock in agreement whereby the seller agrees not to negotiate with other parties during a fixed period.
- Purchasing insurance that will provide compensation in the event of being gazumped.
In October 2017, the government announced that they were looking at ways of reducing the stress of buying property, including a clampdown on gazumping. Despite previous attempts by ministers resulting in little-to-no action, the Communities Secretary Sajid Javid, launched an 8-week consultation before potentially reviewing rules to make house buying ‘cheaper, faster and less stressful.’
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