Most house buyers have heard of the term gazumping, and whilst it is still quite a rare occurrence, in a market like we currently have where demand is higher than supply, people get desperate and may use gazumping as a tactic to steal your next property away from you. In this blog we give you tips and advice to help you avoid this happening to you during your next purchase.
So, what exactly is Gamzumping?
Gazumping is a term for when someone offers a higher amount for a property, after an offer has already been accepted from another party. It all seems a bit unfair doesn’t it!
It’s illegal to gazump people though, isn’t it?
Even though people may think this is illegal, it isn’t illegal at all.
Have you ever seen the words ‘subject to contract’ after the word ‘sold’ on a board or online? These words are really important and refer to the sale contracts that are drawn up by solicitors to complete the transaction.
A house sale is only legally binding when these contracts have ‘exchanged’ and this happens at the end of the process which means that it is legal for someone to offer higher than you, even if you are close to exchange. This leaves you vulnerable to losing thousands of pounds, incurred from mortgage arrangement costs, surveys and legal fees.
Should the Estate Agent try and stop this?
Whilst there are the occasional Estate Agents out there that act in an unscrupulous manner, most are completely against this type of behaviour. Even though agents are acting for the seller (after all, they are our fee payer), we also have a duty of care to the buyers and don’t want to see anyone go through the stress and heartbreak of this situation.
We should point out though, if someone does make a higher offer whilst a sale is progressing, as an agent, we are legally bound to submit all offers to the vendor in writing.
How can I stop it happening to me?
Whilst you cannot definitively stop it happening, there are several things that you can do to lessen the likelihood of it happening.
We mentioned the importance of building a rapport in our ‘doing your own viewings’ blog and this is certainly the case here. If you have started to build up a rapport with the seller and shown them your enthusiasm for their property, this will certainly make it harder for them to accept a higher offer. Some people do become emotionally involved in the sale of their house so try and tap into that. Of course, on the flip side, there are sellers that see it as a business transaction.
Ok, what else can I do?
Make swift progress and communicate with the agent. Nothing makes a seller more jittery than having a buyer that is slow in making progress and has a lack of urgency. If your offer is accepted, get in touch with your mortgage advisor immediately to get the ball rolling with the full mortgage application. Advise your solicitor of your accepted offer too. Most importantly, communicate this with the Estate Agent so that they can update the seller. Showing urgency will definitely hold you in good stead with most sellers.
Home Buyer Protection Insurance
Another thing that you can consider, is taking out insurance. This can ensure that if you are gazumped, you can get some, if not all, of your incurred costs back. Of course, this will not help with all the stress and heartbreak you will feel but at least you will not be entirely out of pocket.
So what happens if someone else offers higher?
If you are unlucky enough to find yourself in this position you do have a couple of options. Don’t be afraid to sell yourself (and your position). After all, if you are quite well progressed, it certainly works in your favour as the seller may not want to go back to square one.
If this doesn’t work then you should be given the opportunity to increase your offer, remember, the agent legally must submit your offer. Before you do this though, really consider how much you want the property and how much you can afford to offer, don’t financially stretch yourself.
If you do increase your offer, again, use your position to your advantage. If you have built up a rapport with the seller and are quite progressed, they may well accept your increased offer, even though it is lower than the other party, just because it is easier for them to do so.
Word of warning for sellers
If you do end up in a position where you have accepted an offer and a new party offers higher, really consider it before just going for the higher amount. Firstly, just because they have offered more, doesn’t necessarily mean that you will get more, for example, a mortgage company may well decide that your house isn’t worth the additional money offered.
Also, we think that if someone is willing to gazump, they will be equally willing to gazunder! Not sure what gazundering is, all will be explained in our next blog.
If you are still unsure about this or any aspect of the house sale/purchase process, please feel free to contact us.
James
Meteor Homes
