Various obstacles can hinder a buyer from securing their dream home – and being ‘gazumped’ by someone with deeper pockets is one of them. Unfortunately, it’s on the rise.
What’s the latest?
Estate agents fear gazumping could be on the increase as potential buyers are prepared to outbid other purchasers to secure a property.
Gazumping refers to the practice where a seller accepts an offer from one buyer, only to reject it later in favour of a higher offer from someone else.
A study by estate agents Countywide found gazumping was currently at a six-year high, affecting 3.6% of purchases.
At the same time, 36% of people responding to a survey by online estate agents eMoov said they had been gazumped on a recent purchase, up from just 13% in 2015.Above: Offering four bedrooms and open plan living is this end-terrace house in Cambridge, on the market for £725,000
Why is it happening?
Although gazumping can be frustrating, it is not illegal under English law, as offers are not legally binding until contracts are exchanged.
It is thought to be making a comeback due to the shortage of properties currently on the market.
With the number of homes for sale remaining close to record lows, limited choice may be driving some buyers to try to secure a property even after an offer has already been accepted.Above: In Newcastle, this three-bedroom detached house is available for £225,000
Who does it affect?
Being gazumped can be a soul-destroying experience for the buyer who originally had their offer accepted, as they are likely to have already invested time and money in the conveyancing process, only to have to start their property search all over again.
But for the seller, allowing a bid to be gazumped means they are able to obtain a higher price for their property.
The eMoov research suggested the problem was particularly acute in London, while Countrywide found it was worst in the east of England.Above: This detached bungalow in the village of Winterton, Scunthorpe, with two double bedrooms, is being advertised on Zoopla at a price of £175,000
Sounds interesting. What’s the background?
In 1997, the Labour Government announced plans to speed up the home buying process through the introduction of Home Information Packs.
These packs, which had to be assembled by sellers before they marketed their home, gave buyers more of the information they needed up front, enabling contracts to be exchanged quicker, reducing the opportunities for gazumping to occur.
But the requirements for the packs were reduced, and they were eventually withdrawn altogether in 2010.Above: Located in a tree-lined avenue in Portsmouth, this three-bedroom semi-detached home is for sale for £440,000
Last year, the Conservative Government said it would review gazumping and try to make conveyancing better value for money and more consumer-friendly.
Gazumping is not an issue in Scotland, as the conveyancing system there is different. Properties are marketed at a fixed price, with negotiations going ahead with the first person to offer that price.
Alternatively, they are marketed as ‘offers over’ a certain price, and should potential buyers express their interest below that figure, they then have to submit a blind bid within a set period, with the highest bidder successful.
While it is not a legal requirement in Scotland to withdraw a property from the market once a fixed price has been met or the deadline for blind bids has expired, it is a strong convention that is adhered to, meaning gazumping is not an issue.
How can you avoid being gazumped?
The Royal Institution of Chartered Surveyors (RICS) recommends you instruct your solicitor to use exclusivity or lock-in agreements for non-refundable deposits.
You could also ask the seller to agree in writing to withdraw the property from the market, once a verbal offer has been received.
Other ways to try and prevent being gazumped, according to the HomeOwners Alliance, include:
- Getting insured: Take out homebuyers protection insurance, so if the sale falls through, you can claim back some of your conveyancing and survey fees
- Be prepared: before you make an offer on any house, make sure you have a mortgage agreement in principle in place, a solicitor lined up and all the necessary documentation to hand, to avoid delays
Top 3 takeaways
- Estate agents fear gazumping could be rising as potential buyers are prepared to outbid other purchasers to secure a property
- A study by estate agents Countywide found gazumping was currently at a six-year high, affecting 3.6% of purchases
- 36% of people responding to a survey by eMoov said they had been gazumped on a recent purchase, up from just 13% in 2015
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