What is Gazumping?
Gazumping is when a seller accepts an offer to sell from a buyer but then towards the end of the process accepts a higher price from someone else. Gazumping can also be when a seller requests a higher price towards the end of the transaction process.This is usually bad for the first-time buyer as they lose out on some costs which they have incurred already such as mortgage fees and conveyancing fees.
Is Gazumping Legal ?
Well, gazumping certainly isn't illegal and and although a bit unfair, It is very much legal and there is nothing a first-time buyer can do to get recourse.
This is simply because until exchange of contracts , there really is no binding agreement in place. Verbal agreements! I hear you scream. Yes,verbal agreements are not strong enough to secure the property and so a seller is fully within their right to walk away from a verbal agreement to sell at any time until the exchange of contracts.
Before contracts are exchanged you will usually employ the services of a conveyancer to carry out searches on the property and then manage the exchange of contracts.This is truly the crucial part of the home buying process as it tends to make or break a sale.If conveyancing takes too long a seller might begin to shop for a better offer with other buyers and as a result gazumping could end up being a first-time buyers fate. To prevent this it is recommended to use a conveyancer who technology plays a key part in their day to day work. This will at least give you some confidence that typical communication delays or ancient methods of doing things will not cost you your first home.
Another reason for Gazumping could be the real estate agents who desire to take as much profit in commision from the property and therefore will continue to market it even after a buyer has been found in the hope that they get a better price for it and therefore a higher commision for themselves.
Gazumping doesn't necessarily mean a higher offer has been accepted. The seller might just have run out of patience with you or the process and accepted a buyer at an advanced stage of the home buying process.
How to avoid Gazumping?
Ensure the seller takes the property off market;The easiest way to avoid gazumping is if the seller has agreed to take the property off the market and instructed their real estate agent to stop seeking more buyers.This will indicate a level of seriousness to you from the seller.
We have already mentioned getting a conveyancer who understands how swift things have to be and use technology to ensure they are as efficient as possible.Your conveyancer might also be able to assist you in getting insurance which would cover you in the case of being gazumped.
If You want to get a property survey you must also consider do this well in advance to prevent any further delays and ofcourse to allow you negotiate prices if need be.
Agreement in principle.
Getting a mortgage or agreement in principle not only marks you as serious to the seller but of course speeds things up once you have an offer agreed.
Finally, You could get an exclusivity agreement.
This is a binding agreement between you and the seller which stipulates that the seller cannot negotiate with anyone during a set timeframe whilst you continue the buying process. This prevents you from being gazumped during that time frame but ultimately the seller can just delay the process and still end up gazumping you after the agreement comes to an end.The agreement works by both the seller and bUyer paying a percentage of the property price e.g 1%. This amount will be lost by any party who tries to back out of the agreement or ignores the agreement.There will also be some conditions at which the price can be shifted or negotiates e.g survey reports or search reports.
The Communities Secretary, Sajid Javid has announced a call for evidence to improve the experience of house buying and selling, making it 'cheaper, faster and less stressful.'He plans to prevent sellers from walking away from a home sale after a certain point.There is some hope after all!