What is gazumping?
All you need to know on this last minute letdown
Last updated on
May 13, 2022 17:03
Let’s imagine that a seller has accepted your offer to buy their property. You pop the bubbly, tell your friends and family, and start mentally decorating every room in your new home.
And then – disaster strikes. The seller turns around and accepts a higher offer from a different buyer.
Welcome to the worrying world of gazumping.
For the buyer, gazumping can cost you both time and money. And of course, it can be heartbreaking if you thought you’d found your future home.
So, how does this happen? Is it allowed? And if so, are there any ways to avoid it? Let’s dive in.
So the basic difference between the two is that gazumping is when a seller goes back on their word, while gazundering is where the buyer does.
Next question: is any of this allowed?
Here’s the bitter truth – while gazumping may not be ethical, it is legal. (So is gazundering.)
This is why:
Even if the seller accepts your offer, it won’t be legally binding until you’ve exchanged contracts. That’s when the buyer’s lawyer and the seller’s lawyer – conveyancers or conveyancing solicitors – formally read out and accept identical signed copies of contracts to each other. At this point, the buyer pays a deposit, and the transaction is legally binding.
Until that moment, once your contracts are formally exchanged by the two solicitors, neither the buyer or seller have to go through with the sale.
(If you’ve ever seen a property listed as “Sold STC,” that means an offer has been accepted, but that selling is “subject to contracts” being exchanged.)
Getting a mortgage approved and doing a survey on the property, while they do progress the transaction on your side, still don’t mean that the sale has to go ahead by law. So if you do gazumped, that may well be at a point where you’ve already spent money on surveys and legal fees, and invested time in getting a mortgage.
It can be demoralising – and expensive – to start from scratch.
Gazumping can happen at any point during the journey – months, weeks, or even days before those contracts are exchanged.
If there’s a lot of gazumping happening in a particular place, it’s usually a sign that there’s way more demand than supply of homes. Basically, anyone who has a home to sell can take advantage of those eager to buy.
But even when property demand comes down, it doesn’t mean gazumping will stop. A recent report revealed that one in six buyers in England and Wales have encountered gazumping, with those numbers higher in some areas, like Sheffield and Yorkshire.
So what can buyers do to avoid this?
The reality is you can’t always avoid getting gazumped, but there are some things you can do to reduce the risk.
If you can show them you’re really into the whole idea by conducting surveys, obtaining an agreement from your mortgage lender, and getting a solicitor on your side, they might be more confident in the transaction.
That’s because all property purchases have to go through what’s called an estate agent solicitor. Offers to purchase have to be officially submitted by the buyer’s solicitor and accepted by the seller’s solicitor – and, in an effort to stop gazumping, both parties are bound by the Law Society of Scotland.
Once the seller’s solicitor has accepted an offer, they can’t accept another one. If another offer comes in that the seller would like to pursue, they have to drop their solicitor and find a new one to pursue the new offer legally.
So, yes, gazumping is still possible in Scotland, but it’s certainly not as simple.
Policies are different, but they generally cover the cost of things like conveyancing, surveys and mortgage arrangement. Prices start somewhere around £49, with high-end policies costing up to about £80.
You have three choices at this point:
There are risks to this of course – mainly that you don’t want to find yourself in a situation down the line where you’re strapped for cash. And when emotions are running high, it's worth spending that extra time and care on decisions.
That being said, if you’re truly in love with the home, it could be worth it.
Using an end-to-end home-buying service like Habito can also help. While we can’t stop gazumping from happening, you’ll get expert advice every step of the way.
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