How to avoid gazumping
Gazumping – it’s happening all around us. The chances are, someone you know has fallen victim to gazumping – and it could be about to happen to you.
Gazumping is stressful and costly. Think of it as the infidelity of the property world, leaving broken promises, sunken resources and hurt feelings in its wake. But is there anything you can do to stop gazumping?
What is gazumping?
‘Gazumping’ is when a buyer has their offer accepted on a property, only to have the seller withdraw their acceptance after a higher offer comes in.
Is gazumping frowned upon? Definitely. Unethical? Maybe. Illegal? No – although many people wish it was!
It’s easy to forget that the sale of a house isn’t legally binding until the exchange of contracts, when the buyer’s solicitor and the seller’s solicitor make things official. After that, the seller can’t pull out without legal and financial ramifications.
Until that point, though, either the buyer or the seller can pull out at any time. Unfortunately for home buyers, gazumping is very common and a leading cause of property sales falling through in the UK.
A whopping 1 in 4 property transactions don’t make it to completion, a risk which many home buyers are unaware of. Gazumping is a risk associated with buying a home, one which people have historically just accepted as part and parcel of the property game. There are ways for smart buyers to protect themselves against gazumping, however, which we’ll come onto in a moment.
The two reasons why gazumping is a disaster for buyers are:
You must start your search again
The evenings spent scouring Rightmove, the weekends spent pounding the pavements and the countless hours of research it took to find your dream property. Letting a property go that we had our hearts set on can be a real blow, and it can be disheartening to have to begin the process from scratch.
Further, if you found your dream home during a lull in the market, you might find that in the time it takes to find another home you love, the market in your chosen area has ramped up again and equivalent houses are significantly more expensive.
You lose an average of £2,400
This is how much the average property fall-through costs UK homebuyers.
After your offer is accepted on a property, you must then get your mortgage arrangement in place, book a home survey and instruct a solicitor. They must all be done before the completion of the sale, meaning the money you spend on mortgage lenders, surveyors and solicitors is lost should the sale fall through (whether that’s due to gazumping or something else).
And when you consider the likelihood of a transaction falling through is 1 in 4, it’s a real possibility that you could be nearly £2.5k out of pocket if you get gazumped.
What can I do to prevent gazumping
Is it possible to prevent gazumping? The answer is unfortunately no – the seller has no legal obligation to honour your agreement until the exchange of contracts (by which time you’ll have spent a pretty penny in upfront fees). However, you can reduce your risk in the following ways:
Bond with the seller
It’s tempting to think of sellers who are prepared to gazump you as soulless monsters. In balance, though, they’re people just like you looking to get the best possible price for their home. If the seller has a warm and fuzzy feeling about you (and your partner and/ or family) living in their home, they’ll be more likely to honour the initial agreement.
This tip won’t work against a significantly higher offer, but if its just a couple of grand over yours, your seller might ignore a slightly higher offer if they have already decided you’re a lovely person unlikely to cause them any headache.
Be careful though, the world of property is a cut-throat one and all the niceties in the world won’t prevent gazumping if your seller is ruthless.
Make sure you’ve got your mortgage agreement in principle in place before you make your offer, and don’t be afraid to chase solicitors, surveyors and estate agents if they aren’t being as responsive as you’d like. If the seller gets the vibe that you’re going to take your sweet time sorting out the administrative side of the sale, they’ll be more likely to jump on another offer if it comes in.
Assure the seller it’ll be a smooth process
Similarly, make sure the seller knows you’re deadly serious about the property and aren’t looking elsewhere. If you aren’t in personal contact with the seller (e.g. if you didn’t swap numbers), then make sure your agents keep in touch with them to let them know things are moving along swiftly your end.
This is especially impactful if the seller has had a previous buyer pull out or been part of a broken upward chain.
Be a chain-free buyer
Obviously, if you’ve found your dream home already and are part of a chain, this will no longer be possible. But if you’re concerned about gazumping and haven’t started your search yet, you’ll be in a better position to snatch up the property of your choice if you’re a chain-free buyer. Consider selling first and going into a short-term rental while your sale finalises. That way, you will make yourself more attractive to sellers who might ignore a higher offer that comes with a chain in favour of your chain-free position.
Take out Gazumping insurance
This is the only thing guaranteed to protect you from gazumping. Gazumping insurance doesn’t prevent you being gazumped, but it allows you to reclaim the money you’ve spent on mortgage lender fees, solicitor’s fees, estate agency fees and surveyor’s fees should the sellers withdraw their acceptance and go for a higher offer. Also known as Home Buyers Protection Insurance, it’s the only sure-fire way of safeguarding your money, and nobody should buy a home without it.