What Is Gazumping?
We all know that buying a house can be a long and arduous process. One of the worst complications that can happen during this process is ‘gazumping’. This occurs when a buyer has had their offer accepted but then the seller accepts a better offer from another buyer before the sale is completed. Gazumping usually occurs when the seller has been made a higher financial offer. However, sometimes the seller may choose an alternative offer to speed the process up, if the current buyer is facing delays with surveys etc.
Gazumping is a real headache for buyers. It puts you straight back at square one, and in some cases can cost you money if you’ve already paid for surveys, conveyancing and mortgage fees.
Is Gazumping Illegal?
As unfair as it seems for buyers, unfortunately gazumping is perfectly legal. Even when your offer has been accepted, the agreement doesn’t become legally binding (in England and Wales) until contracts have been exchanged. The formal exchange of contracts usually comes very late in the buying process. The exchange of contracts in most cases will happen once a property survey has been completed, once a conveyancer has conducted the necessary searches and after mortgage offers have been received. As the sale is not legally binding until later on, unfortunately gazumping can be quite costly to buyers who experience it.
How Can You Avoid Being Gazumped?
Whilst there’s nothing concrete you can do to prevent gazumping, there are practical measures that you can take in order to help avoid it. This includes:
When buying a property, you want to get to the exchange of contracts as quickly as possible. This is the point at which the agreement is legally binding, and at which point you are no longer at risk of gazumping. With this in mind, be as proactive as you can in arranging surveys etc. as delayed completion will only increase the risk of getting gazumped. It helps to try and maintain regular contact with your conveyancing solicitor and mortgage broker to ensure that they are on top of responding to your requests.
Get A Mortgage In Principle
A mortgage in principle is a statement from a lender saying that they’ll lend a certain amount to you for the purchase of a property. In other words, it’s an official estimate of how much you can afford to borrow on a mortgage. Whilst a mortgage in principle is only a conditional offer, if you obtain one before going into the buying process, it is likely to speed procedures up a lot.
Ask For The Property To Be Taken Off The Market
Seller’s are under no obligation to take the property off the market once they’ve accepted your offer, however it’s always worth asking. If you’ve gotten to know the sellers, and shown that you're serious about the property, they are likely to be more open to taking it off the market. This reduces the risk of gazumping for buyers by reducing the chance of more people seeing the property and putting in higher offers.
There are many different costs involved in moving house and so it’s always sensible to take out insurance. Taking out home buyer protection insurance won’t prevent gazumping, but it will leave you in a much better financial position in the event that you do get gazumped. If the sale falls through, having insurance will cover some of the cost spent on conveyancing, surveys and mortgage fees.
Consider Getting A Lock-In Agreement
A “lock-in agreement” is a contract between the seller and the buyer that gives the buyer exclusive rights to the property within a certain time period. This enables the buyer to organise their mortgage and removals company etc. without the risk of being gazumped. There will be legal fees involved, however it’s worth discussing the option with a conveyancing solicitor to see if it will benefit you.
Once you’ve reached the point of completion in the buying process and are ready to move into your new property, don’t hesitate to get in touch with our experienced removals team at Hackworthy & Sons. With over 45 years experience, we’ll ensure that moving day runs as smoothly as possible from start to finish.