Compare & Save on Conveyancing Solicitors
Speak to accredited Conveyancers & save today!
What is Gazumping?
Gazumping is when a buyer who has had an offer accepted is then pushed out of the sale due to the seller accepting a different offer from someone else. Though considered unfair, it is legal to do in England and Wales but due to the difference in policies, it’s rarer in Scotland.
It can be very disappointing to lose out on a property you thought you had been accepted for. Gazumping can happen any time before you exchanging contracts. This means that even after comparing conveyancers and starting the process, you could still be outbid. Compare My Move has created this guide to help you understand the meaning of gazumping and how to avoid it, making your conveyancing process that much easier.
This article will cover the following points
What is Gazumping? Is Gazumping Illegal? Gazumping in Scotland How to Avoid Being Gazumped What to Do if You’re Gazumped Saving Time and Money With Compare My MoveWhat is Gazumping?
Gazumping is when a buyer has an offer to purchase a property accepted by the seller but before the sale is completed, the seller accepts a different offer from another buyer. It’s not to be confused with gazundering which is when the buyer themselves lowers their offer on a previously agreed price. Gazumping can occur any time before exchanging contracts as the transaction is not yet legally binding.
Gazumping can occur when the seller wants to maximise the amount they’ll obtain and finds a higher offer. However, there are also other factors that can lead to gazumping. For example, if the buyer takes too long to conduct a property survey or to sell their previous home, then the seller may reject the offer due to the delay. If they find a buyer who they believe is in a better position to move more quickly, they may accept their offer instead.
It can be disappointing being pushed out of a sale you thought you’d been accepted for. This is especially so if you’ve already paid for the survey and conveyancing fees and have arranged a mortgage. For reasons like these, gazumping is universally frowned upon but it is not illegal.
Is Gazumping Illegal?
Gazumping is actually legal throughout England and Wales. Despite making an offer and having it accepted, the agreement between you and the seller does not become legally binding until the contracts have been exchanged. Until then, the property is listed as ‘Sold STC’ which means, even though the offer has been accepted, the sale is still 'subject to contract' and being agreed upon.
As the transaction is not yet complete or legally binding, another buyer is not breaking the law by providing the seller with an alternative offer. The seller is also within their right to accept. It’s considered very unfair as the previous buyer would have already paid for the survey and other costs, but gazumping is not illegal.
Despite this, the government has recently revealed that there will potentially be new schemes introduced in the next year or so to help reduce the risk of being gazumped in the UK. This new scheme is called a 'reservation agreement' which will reduce the number of property sales falling through. This scheme would mean both the buyer and seller paying an additional fee once the sale has been agreed upon, almost acting as a deposit. If either party then withdraws from the sale, they will lose their money. Some estate agents already adhere to this scheme and buyers purchasing a new build home already have to pay a reservation fee, so it's already active is some transactions.
Gazumping in Scotland
Although gazumping is still legal in Scotland, it is a much rarer occurrence compared to England and Wales. To prevent buyers from being gazumped in Scotland, an offer that’s made and accepted on a property is considered as legally binding. Once you have made the offer, you’re expected to be committed and follow through with the purchase.
The only time gazumping is possible in Scotland is after a property survey is conducted, revealing the repairs needed and a general average of their cost. This then provides the buyer with a way to renegotiate, possibly reducing the asking price. This is when the seller may be tempted by a higher offer. However, it's still rare for gazumping to occur.
How to Avoid Being Gazumped
The latest data from Market Financial Solutions revealed that 31% of British homeowners in the past decade have lost out on a property deal because of gazumping. This is a staggering amount of homeowners and proves how common the issue is. Out of the people who lost out on a property, 39% still had to pay remaining fees despite not completing the transaction. It's no surprise that the data also revealed that 80% of people are in favour of legally banning gazumping due to the difficulty of buying property increasing in recent years.
The data above proves that gazumping is an issue you need to be aware of. Not everyone will face the problem when buying a house, but it's something to consider when you're putting your offer in. There are a few things buyers can do to avoid being gazumped. From getting the property off the market to being organised in advance. Compare My Move has created a helpful list to aid you in the process of buying a house and prevent yourself from being gazumped. It’s never 100% preventable but there are a few tips and tricks to consider.
So, what can you do to avoid being gazumped?
- Be prepared and be organised - before making an offer, ensure that all your paperwork is gathered and that you’ve worked out your budget. It’s important to reduce the chance of any delays, so being as organised as possible will help. Find a conveyancing solicitor, sort out a mortgage, have the necessary documents at hand and sort out your finances. The seller will be much more willing to continue if the process moves along quickly.
- Get a mortgage in principle - sorting out a mortgage in principle is vital to prepare in advance. A mortgage in principle is a conditional offer made by a mortgage lender stating that they will ‘in principle’ give you a loan up to a certain amount if the conditions are met. Having this completed early will speed up the process and sell you as an organised and appealing buyer.
- Work quickly - try to reduce the number of delays by moving the process along quickly. Once the contracts have been exchanged the sale is legally binding so it’s better to get to this stage as soon as possible. The quicker you hire a solicitor and surveyor the better. Compare My Move has the perfect tools to allow you to compare quotes and find a professional, verified conveyancer, saving you both time and money.
- Ask for the property to be taken off the market - it’s not always possible but taking the property off the market reduces the exposure the property has and limits the number of potential buyers who can provide the seller with counteroffers.
- Build a relationship with the seller - the better the relationship you have with the seller, the more likely they are to favour you as a buyer. Keep them informed with what you’re doing and how close you are to completing the process.
- Get insured - home buyer protection insurance is a good way to protect yourself against gazumping. If the sale falls through because the seller accepts another offer, you can claim back some of the costs you’ve already spent: e.g. conveyancing fees, survey fees etc. It provides extra peace of mind and protects you financially.
What to Do if You’re Gazumped
If it still occurs after doing everything you can to try preventing it, take some time to think about your next steps and how you’ll deal with gazumping. First, review your finances and work out whether or not you can gazump your gazumper with another counteroffer. It doesn’t mean it can’t happen again, but if you’re financially able to then it could be worth a try.
Another option would be to try and sell yourself as an attractive buyer. If you’re a first-time buyer then use that to your advantage. Any buyer without a property chain (first-time buyer or otherwise) is more appealing due to the process moving much more quickly. If you’re flexible with the moving date, highlight this. If you’re a cash buyer or have an approved mortgage, mention it. Mention anything that will make you seem more appealing to the seller, but remember to not be deceiving.
You can never be fully protected against gazumping, so it’s better to be prepared. However, if you’ve been gazumped after exchanging contracts, then you should speak to your conveyancing solicitor for advice. Even though it’s rare, it can still happen and you would then have a legal case against the seller due to the breach in contract.
Saving Time and Money With Compare My Move
We hope this guide has helped you understand the meaning of gazumping and how to avoid it happening to you. If you’ve had your offer accepted then it would be wise to find a professional conveyancer as soon as possible to reduce the risk of being gazumped. Simply fill out our quick and easy form to instantly get connected with up to 4 licensed conveyancing solicitors near you.