Tips on Avoiding Gazumping
Of all the things that can go wrong gazumping is the one that raises the fiercest passions.
What is Gazumping?
Gazumping means a vendor reneging on their agreement to sell you
a property at a certain price. For example, a property is for sale at an asking price of £99,950. You make an offer of £95,000 which the vendor accepts.A few hours, days or even weeks later, a second buyer makes an offer of £96,000 for the same property. The vendor rings you and says:
A. I'm selling to someone else for more money or
B. Unless you increase your offer to £96,000 or more I will sell to somebody else.
In both cases you have been gazumped. Gazumping is not the acceptance of an offer above the asking price. In order to gazump you a vendor has to renege on an offer after it has been accepted. Thus, if a property is for sale at £99,950 and two buyers bid against each other until a sale is agreed at £105,000, the losing party has not been gazumped. They have just been outbid.
How Common is Gazumping?
Gazumping is not nearly as common as the press would have us believe. It affects only about one to two per cent of all transactions, and occurs mostly in London and the south east where the market is most buoyant. Nevertheless, when it does occur it is most unpleasant. The gazumped buyer is caused considerable inconvenience, and is often left with a bill for legal fees and survey fees of several hundred pounds.
Why does it Happen?
Gazumping usually occurs because a property is kept on the market after a sale has been agreed. Sometimes there is a legitimate reasons for the vendor to do this: for example, the buyer has not yet sold their own property. In other cases, the vendor is dissatisfied with the original offer and keeps the property on the market to try to obtain a higher one.
Gazumping is most likely to happen when a sale is slow to progress in a buoyant market, where prices can sometimes rise by as much as two or three per cent per month. Thus a property that is sold for £100,000 could be worth as much as £109,000 by the time a slow purchaser is ready to exchange contracts 12 weeks later.
Whose Fault is it?
Estate agents are usually held responsible for gazumping. In truth, they are not usually the guilty party. An estate agent has a legal and ethical duty to act in accordance with the client's instructions at all times. Thus if a client tells him to keep the property on the market after an offer has been accepted, then he must do so. If a higher offer is received, the agent must by law pass it on to the vendor. The decision to gazump someone is always made by the vendor, not by the agent. The real culprit, though, is the outdated home buying process which causes an average delay of eight weeks before contracts can be exchanged.
How can you Avoid being Gazumped?
There are five things you can do to reduce the chances of being gazumped.
- Do not try to buy a property until you have sold your own.
- Insist that the property you are buying is taken off the market as a condition of your offer.
- Exchange contracts as quickly as possible.
- Keep the vendor closely informed of all progress.
- Try to maintain a cordial relationship with the vendor throughout.
