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gazumping

What is gazumping?

Let's delve into a rather disheartening phenomenon in the property market known as 'gazumping.'

Nov 2023 | Essentials

Let’s delve into a rather disheartening phenomenon in the property market known as ‘gazumping.’ This term, which strikes fear into the hearts of prospective homebuyers, can turn your dream of owning a home into a nightmare.

 

Understanding Gazumping

So, what exactly is gazumping? In simple terms, gazumping occurs when a seller accepts an offer on their property but then accepts a higher offer from another buyer, leaving the original buyer ‘high and dry’ or without any recourse. This typically happens before contracts are exchanged, making it a legal, albeit ethically questionable, practice.

Picture this: you’ve spent months searching for your perfect home. You’ve made an offer, and it’s been accepted. You’ve even started planning your move and maybe even dreamed about where you’ll place your furniture. Then, out of the blue, you get a call. The seller has accepted a higher offer. Your plans are shattered, and you’re left feeling both betrayed and helpless. This is the emotional toll of gazumping.

Why Does Gazumping Happen?

The primary reason gazumping occurs is the competitive nature of the property market, especially in high-demand areas. Sellers are naturally inclined to get the best possible price for their property. Suppose a higher offer comes along, particularly after an initial offer has been accepted. In that case, the temptation can be too great to resist.

Another factor is the lengthy and often cumbersome process of buying a home. In the UK, the period between accepting an offer and exchanging contracts can be several weeks, sometimes even months. The property remains on the market during this time, and other potential buyers can swoop in with better offers.

 

The Emotional and Financial Impact

Gazumping isn’t just a blow to your emotions; it can also hit you financially. When your offer is accepted, you start incurring costs almost immediately. You might pay for a survey, legal fees, and other related expenses. These costs are often non-recoverable if you’re gazumped, adding financial injury to emotional insult. For instance, a survey can cost [insert average survey cost], and legal fees can range from [insert average legal fees]. These expenses can add up quickly, especially if you’ve made multiple offers before being gazumped.

Moreover, gazumping can significantly disrupt your plans. If you’re in a chain where your purchase depends on selling your current home, being gazumped can cause a domino effect, leading to the collapse of multiple transactions. A chain is a sequence of linked property transactions, where each purchase is dependent on the sale of the previous property. If one link in the chain breaks, the entire chain can collapse, causing significant delays and potential financial losses.

 

Protecting Yourself Against Gazumping

While gazumping is a risk, there are steps you can take to protect yourself. Here are a few tips:

  1. Ask the Seller to Take the Property Off the Market: Once your offer is accepted, ask the seller to stop marketing the property. This will reduce the likelihood of higher offers.
  2. Move Quickly: Expedite the process as much as possible. Ensure your mortgage is in place and your solicitor is ready to move quickly.
  3. Get a Lock-In Agreement: Though not common, some sellers might agree to a lock-in agreement in which they commit to not accepting other offers for a specified period. A lock-in agreement is a legally binding contract that prevents the seller from accepting other offers for a certain period, typically 30 to 60 days. This can give you a sense of security during buying, reducing the risk of being gazumped.
  4. Take Out Home Buyer Protection Insurance: Also known as gazumping insurance, this policy can’t prevent gazumping but can cover costs like conveyancing, surveys, and mortgage arrangement fees if the sale falls through. Policies typically start around £49.

 

What Should You Do if You Get Gazumped?

If you find yourself gazumped, you have three main options:

  1. Make a Higher Offer: If you can afford it and love the home, consider increasing your offer. But be cautious—don’t overstretch your finances.
  2. Sell Yourself to the Seller: Highlight why you’re the best buyer. Let the seller know if you need to be in a chain, a first-time buyer, or have a compelling personal story. Show your flexibility and commitment to completing the purchase.
  3. Cut Your Losses and Move On: Sometimes, despite your best efforts, you’ll lose out. Take a deep breath, accept the situation, and start your search again.

 

Conclusion

Gazumping is an unfortunate reality in the property market, driven by the desire to get the best deal and the often lengthy buying process. While it can be emotionally and financially devastating, being aware of the risk and taking proactive steps can help you protect yourself. Remember, knowledge is power, and being prepared can make all the difference in the property market.

 

Ready to make informed mortgage decisions? Reach out to our experienced advisers, and we’ll give an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!

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