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.
Gazumping vs gazundering: what’s the difference?
- Gazumping is when a seller goes back on their acceptance of an offer, because they’ve received a higher one from a new buyer.
- Gazundering is when a buyer lowers their offer just before contracts are exchanged. The seller is often forced to accept because they don’t want the whole deal to fall through. Especially frustrating if they’re selling in a chain (using the money from the sale of one home to buy another). We cover all the details of gazundering here.
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.
- Gazump rhymes with trump – the seller gets an offer that trumps the one they’ve accepted from you.
- Gazunder rhymes with under – the buyer comes in under what they offered.
Next question: is any of this allowed?
Is gazumping legal?
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.
When does gazumping happen?
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?
How can you avoid gazumping?
The reality is you can’t always avoid getting gazumped, but there are some things you can do to reduce the risk.
- Get your ducks in a row. The quicker you can get things in order, the less opportunity there is for the deal to go flat. If communication is slow with anyone involved – the seller, your solicitor, your lender – put the pressure on. This also means responding quickly to anything your estate agent, mortgage broker, or conveyancer sends you.
- Ask the seller to take the property off the market once your offer has been accepted. If it’s not out there for the taking, it might not be taken. Sellers might not be happy to do this until the deal officially goes through, but it’s worth a shot.
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.
- Put a “lockout agreement” in place. This is a contract between the buyer and the seller that gives the buyer exclusive rights to the property for a specific period. Within the time frame stated in the agreement, the home can only be sold to you and not to anyone else. Your lawyer will help you with this. Once it’s in place, the aim is to get to exchange of contracts before the lockout agreement expires.
- Buy in Scotland. Okay, this might not be the best option for everyone – but things do work slightly differently there. If you live in Scotland, gazumping is less common.
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.
- Take out home buyer protection insurance. Also called, fittingly, gazumping insurance, home buyer protection insurance is not compulsory but can be a good idea. While it can’t exactly prevent gazumping from happening, it can protect you against losing a bunch of money if the deal falls through.
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.
What should you do if you get gazumped?
You have three choices at this point:
- Make a higher offer. Do you have the option of putting more money into this? Can you gazump the gazump by making a jump?
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.
- Show them why you’re the best choice. Okay. It’s time to pull out all the stops. Show them how flexible you are, that you’re not buying in a chain (if this is true), that you’re a first-time buyer who’s never seen a more beautiful home in their lives. Tell them they can take more time to move out if need be, that you’re looking to raise a family in their home, that your grandfather used to own the bakery in the town. Use what you’ve got. Sell to the seller. You’ve got this.
- Cut your losses. Sometimes, no matter how much you put into it, the gazump will get you. Take a deep breath (or swear loudly – whatever works for you), and then get back on the horse.
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.