Steps you can take to minimise the risk of losing out on your new home after your offer has been accepted.
If you're in the process of buying a home, you've probably heard about gazumping. And while it may be less common now, it can still happen.
Gazumping is where a seller accepts an offer, only to reject it later in favour of a last-minute higher offer from someone else.
As anyone who has been gazumped will testify, it’s a horrible thing to happen when you are trying to buy your dream home.
In many cases, unless you can somehow find the cash to make a higher counter offer, it means that a lot of time and money has been wasted – and that there’s no choice but to go back to square one and start the property search all over again.
You might expect this controversial and unpopular practice to be illegal – but it isn’t. Under English law, the agreement between you and the seller does not become legally binding until contracts have been exchanged.
However, there are steps you can take to reduce the risk. We take a closer look.
1. Get organised
One of the simplest ways to reduce the risk of getting gazumped is by being organised.
Make sure your finances are in place and that you’ve got a mortgage ‘agreement in principle.’ 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.
You also need to have a solicitor appointed – one who is available and proactive – and all the necessary documentation to hand, including the required ID.
If you are selling at the same time as buying, get your property on the market. Better still, get an offer on your current home before making an offer on the one you want to buy to ensure timing won’t be an issue.
The shorter the time between agreeing a sale and exchanging contracts, the less likely it is the deal will fall through.
2. Get the property taken off the market
Once your offer is accepted, you should ask the seller to take the property off the market.
Make sure this is done in writing or it will not be legally binding, meaning the seller can change their mind at any time.
You should also ask the estate agent to remove signs from outside the property and remove its online listing.
While the seller and agent aren’t legally obliged to do this, you should question their reasons if they say no.
3. Keep things moving quickly
Do all you can to keep the process moving along as quickly as possible. This means being in regular contact with your mortgage broker and conveyancing solicitor to ensure they respond quickly to requests for information.
Also make sure you read, sign and return forms as promptly as possible.
4. Get friendly with the sellers
There are no guarantees this will work, but if you take the time to get to know the sellers – and show them you’re a serious buyer with your heart set on the property they’re selling – there’s less chance of them dropping you at the last minute for a better offer.
5. Consider a lock-out agreement
You might want to think about a ‘lock-out agreement’ or ‘exclusivity agreement.'
This is where the vendor agrees not to seek, or accept, other offers from other buyers for a certain period.
While this can help demonstrate how serious you are, a seller may not want to sign it.
Talk to your solicitor to find out what’s involved – and the potential cost of drawing up one of these agreements. But be warned, it can get fairly complex.
6. Take out specialist insurance
You might want to look into taking out Home Buyers Protection Insurance.
A policy covers you for the loss of upfront expenses you’ve made in good faith to purchase a property (such as legal, survey and mortgage lending costs), in the event of the purchase falling through.
7. Buy at auction
Buying at auction means there is no risk of gazumping – but it does come with a lot of different risks – so don’t make any hasty decisions, as you need to go in with your eyes firmly open.