A common source of frustration for home buyers is having their offer ‘gazumped’ by another party. Especially for first-time buyers, this is often something they didn’t realise that could happen – many people think that once their offer is accepted, they’re home and dry, and it’s time to start furniture shopping, but unfortunately not. To avoid any disappointment, it’s important to understand what gazumping is and how to avoid it.
What is Gazumping?
Gazumping occurs when you are in the process of buying a property, and another party makes a higher offer, which the seller then accepts. This pushes you back out of the purchase, and you have to either make another, even higher offer, or go back to square one and search for another property.
This can happen at any time before you’ve exchanged contracts. Most of the time, this happens because the seller wants to maximise the amount they obtain from the property by accepting the higher offer. However, other factors can also come into play. Sometimes it’s down to timing – for example, if you are taking too long to sell your home, arrange a survey, or if your solicitor is delaying the process, the seller may decide to accept an offer from another party, who is able to act more quickly.
Unfortunately, the estate agent is legally bound to report all offers received to vendors upon receipt and the agreement between you and the seller does not become legally binding until contracts have been exchanged. If you look at the properties we list, many are advertised as ‘Sold STC’, which means an offer has been accepted but the sale is still “subject to contracts” being agreed and exchanged.
Exchanging contracts comes towards the end of the sales process, and so gazumping can be costly to buyers who have already spent money on surveys, arranged a mortgage and paid the conveyancer for local searches.
However, just because a higher offer is made doesn’t necessarily mean that the seller will accept it, and there are steps you can take to avoid being gazumped.
Steps you can take:
- Be prepared – make sure you have a mortgage agreement in principle in place, a solicitor lined up and all of the necessary documentation to hand.
- Move quickly – keep in contact with your mortgage broker and conveyancing solicitor to keep the pressure on and ensure your case doesn’t fall by the wayside, and respond quickly to requests for information.
- Ask for the property to be taken off the market – if the property is no longer being advertised, there’s much less chance of a higher offer being made. You’ll have more luck if you offer something in exchange to show your commitment e.g. a survey undertaken as soon as possible after the offer has been accepted.
- Consider a “lockout agreement” – this is a contract between the seller and the buyer stating that the buyer has the exclusive right to buy the property within a certain period of time. Speak to your conveyancing solicitor about what would be involved and the cost of drawing up the agreement.
It is important to remember that financial benefit is not always the only priority for sellers, and there are things you can do to make yourself an attractive buyer. For instance, first-time buyers have the advantage of having no risky chains which could fall through, meaning that your sale is able to move much more quickly. If you are concerned about being gazumped, make sure you make the seller aware of the other strengths you bring to the table as a potential buyer, and they may accept your lower offer based on these factors.