When you’ve successfully saved a deposit, found a place you’d like to buy, and your offer is accepted, it can be tempting to crack open a bottle of prosecco and tell all your pals that you’re a homeowner. But it’s a sad fact that even after a seller has agreed to sell you their home, things can still go wrong and in the worst case scenario, the property could be snatched from your grasp before you’ve collected your keys.
One of the most frustrating things that can go wrong is ‘gazumping’.
What is gazumping?
Gazumping is a term often used to refer to when another buyer makes a higher offer on the house you are in the process of buying. You may have offered £200,000 for the property and the seller might have accepted this offer, but if someone else swoops in with £205,000 before you’ve exchanged contracts, the seller might ditch you in favour of the extra £5k.
Is gazumping legal?
It may come as a surprise but gazumping is completely legal. Sure, the seller might have promised you the property, but until you’ve exchanged legally binding contracts, nothing is formally set in stone and they’re under no legal obligation to go ahead with the sale. In some cases, sellers might even change their mind and decide not to sell the property to anyone! And they’re well within their rights to do this, even if you’ve already spent hundreds on valuations and solicitor fees.
You may have noticed the term ‘Sold STC’ on property advertisements and this means that while an offer has been accepted, the sale is still “subject to contracts” aka it’s yet to be formally agreed and exchanged.
For more blog posts like this, take a look at Can’t Swing a Cat’s first time buyer blog section.
How much can being gazumped cost me?
If you get gazumped during the house buying process, the amount you’ll lose depends on how much you’ve spent on surveys, mortgage broker fees, conveyancing fees, and valuations. The amount lost can be hundreds but in worst case scenario is could be upwards of £1,000.
Read more: How To Find A Mortgage Broker You Can Trust
What can I do to avoid being gazumped?
Get organised before you make an offer
By being as organised as possible before you make an offer, you can potentially speed up the process and complete the purchase before someone else swoops in with a higher offer. Make sure you have a mortgage agreement in principle, a solicitor lined up and all of the necessary documents at the ready.
Get insurance
Home buyer protection insurance could be worth consideration. While this won’t stop you getting gazumped and missing out on the property you’d like to buy, you’ll be able to claim back some of your conveyancing fees, survey fees, and valuation costs.
Ask the seller to take the property off the market
It’s worth asking the seller to take the property off the market, though there’s no guarantee they’ll do as you ask.
You’ll have a greater chance of encouraging them to say yes if you act fast and commit to surveys etc straight away. Once the seller can see that you’re a serious buyer and you’re willing to complete the purchase asap, they’re more likely to pull any ads that are still live.
Consider a “lock out agreement”
A lock out agreement is basically a contract between the seller and the buyer that says the buyer has the exclusive right to buy the property, providing it’s completed within a certain period of time.
Again, there’s no guarantee the seller will agree to this, but it can help to prove your commitment to the purchase. Sellers that have had a sale fall through in the past or want to hurry the sale along may be more likely to agree to this. Speak to your conveyancing solicitor for more information on this type of agreement.
Ask for proof of a higher offer before increasing your own offer
If the estate agent claims a better offer is on the table, don’t be afraid to ask for written proof of this. Some unethical agents fabricate higher offers to encourage the existing buyer to pay a higher price.
If you get proof that the offer is genuine, try not to panic-increase your own. You’ll still need to make sure that the new price is in line with the valuation and that you can afford it.
What should I do if I am gazumped?
If you’ve been gazumped, it’s time to reassess your finances to see whether you can gazump the gazumper right back. Ha! That’ll show ’em!
But avoid taking on more debt than you can afford and think twice before draining all your savings completely. Although you may lose money if the sale falls through, this can sometimes have a much lesser impact on your finances than overstretching yourself to counteract the gazumper’s offer. A few weeks from now, you may even find a property you like so much more than the one you just got gazumped on.
What does gazundering mean and can that affect first time buyers?
Gazundering is kind of the opposite to gazumping, depending on how you look at it. While gazumping affects home buyers (whether they’re a first time buyer or not), gazundering is an issue that affects sellers.
Take a look at my post What Is Gazundering And How Can You Avoid It When Selling Your Home if you’d like to learn more.
