Picture the scene – you’ve been through the long and tiring (but also very exciting) process of searching for your dream home, and you’ve found a property that fits the bill just perfectly. You’ve done your sums, and it’s within your budget – so you take the plunge and make an offer. Negotiations are made, moves are played, and deals are struck: your offer is accepted!
But it’s not time to crack open the champagne just yet. There’s a still a chance you could be ‘gazumped’. Sounds nasty, and it can be – as it means another party making a better offer which is accepted over yours, thus sending you back to square one, potentially a fair bit out of pocket.
In this article, we explore how gazumping works; whether you can avoid it; and what to do if it happens to you…
How does gazumping work?
In the vast majority of cases, gazumping occurs when another buyer offers more money – and, whilst you can curse their greediness all you want, it is the seller’s prerogative to maximise their income. They are therefore likely to take the higher offer at the expense of yours.
Sometimes, you may be gazumped for slowness – if things are being held up with the sale of your current home, if the necessary surveys and legal paperwork are taking too long etc. Some sellers may have time pressures that mean they need a buyer who can move quicker.
Unfortunately, you can be gazumped at any point between making an offer and exchanging contracts (when the sale becomes legally binding – see our guide to this here). So definitely don’t put the bubbly on ice until you’ve reached that crucial stage of no return!
Is gazumping legal?
The short answer is yes, afraid so. As unfair as it may seem, the sale is not a done deal until you’ve exchanged signed contracts. Up until this point, it is an unwritten agreement that can be doubled back upon by the seller.
Estate agents are obliged to pass on all offers, so if one comes in considerably higher than yours you may find yourself gazumped. On property websites, you’ll often see houses marked ‘Sold STC’ – meaning an offer has been accepted, only subject to contracts being agreed and exchanged.
The frustrating thing is, this key legal milestone comes relatively late on in the process – after you’ve spent months searching, securing a mortgage, paperworking, and paying solicitors fees. So is there anything you can do to avoid being gazumped and safeguard against the expense?
Can you avoid being gazumped?
Again, sadly the simple answer is no, not completely. You can’t stop the seller accepting another offer full stop – but what you can do is ensure you give them as few reasons as possible to do so, and take out insurance to protect you against the fallout if they do.
Preparation is key as always. Make sure you have a mortgage Agreement In Principle set up beforehand, to make securing the money itself easier (see our guide to mortgages here). Likewise, get your solicitor/conveyancer sorted and ready to go in advance.
Speed is also of the essence! Deliver on your side of the bargain as quickly as you can, from the offer being accepted to exchange of contracts. Push your solicitor to move fast, and your mortgage lender too – be the force driving the process forward on all fronts.
Make sure you take out home buyer protection insurance. This costs approximately £50-70, and lasts for 120 days – and it means, in the event of being gazumped, you can claim back some solicitors’ fees, survey costs and other expenses. It’s certainly worth it to minimise your risk.
Get to know the sellers well too, and communicate with them thoroughly. Ensure they know you’re serious, stress how much you love the place, pull on their heartstrings by playing the first time buyer card (if you are one) – all of this helps build a rapport that can work in your favour.
You may then be able to persuade them to take the house off the market, if it’s clear you’re committed – sellers are often willing to do this. Or even better, establish a lock-out agreement, in which the seller gives you exclusive buying rights for a certain period of time (e.g. 10 days) – this usually entails a deposit payment and some legal fees, but it’s worth it for peace of mind!
