Buying a House > Conveyancing > Gazumping

For all the stresses that come with moving house, there are not many better feelings in the world than when your offer is accepted. Finally, after the travails of conveyancing, it looks like you’re about to get the keys to your dream home. But, before you head on down to a Swedish furniture outlet and begin cracking open the champers, it’s important to remember that you are not quite over the finish line.

The acceptance of your offer may seem like the final hurdle, but the road to getting your keys is long and treacherous, with plenty of potentially major potholes. One of these potholes is the dreaded act of ‘gazumping.’

So, what is gazumping exactly?

Gazumping, like ‘Pow!’ and ‘Wallop!,’ is a word that sounds like it belongs in a cartoon fight scene, but it comes with some pretty serious consequences.

Gazumping is where another party makes a higher offer on the house that you are in the process of buying and has their offer accepted. This can lead to you crashing out of the home buying process and walking away with your tail firmly between your legs – and emotionally drained.

Emotionally, if you’ve been gazumped, you can be left feeling pretty forlorn with the whole home-buying process, and it can be hard to see the light at the end of the tunnel. In just a matter of days, you have been through the emotional meat grinder of sending your offer, having it accepted, getting your things together to move forward with the process, and then having it all snatched away from you in front of your very eyes.

If the emotional implications weren’t bad enough, gazumping can also make a dent in your finances.

By the time that an offer has been made on a home, it’s more than likely that a buyer has spent money on conveyancing fees, survey charges and mortgage arrangement fees. If you’re then gazumped, all of that money goes down the drain, meaning that you are left thousands of pounds out of pocket – something that nobody wants.

Protect Yourself against Gazumping

Despite the controversy and many protests surrounding it, gazumping is still legal in the UK. But forewarned is forearmed… Here are seven key ways that prospective buyers can protect themselves from being gazumped.

1. Mortgage in Principle

The rule of thumb when buying a house – and to protect you from being gazumped – is that speed is of the essence.

Make sure you’re prepared and ready to move as quickly as possible as soon as your offer is accepted. One of the best ways to boost your speed of action is by getting a ‘mortgage in principle’.

A mortgage in principle is a conditional offer made by the mortgage lender that they will ‘in principle’ give you a loan up to a specific amount agreed by both parties.

Obviously, there are still several hoops to jump through after the principle has been agreed, but having that agreement will help speed things up a lot.  Ensure you have your solicitor lined up and all the necessary documentation ready and to hand for the home-buying process.

2. Have the property taken off the market

Another step you can take to avoid being gazumped is to ask for the property you’ve offered on to be taken off the market.

While some sellers may not be too keen on this – wanting to make sure that their house is sold for the best price possible – if a property is taken off the market, there’s a much smaller chance of someone pipping you to the post with a better offer.

It may take some luck to have the property removed from the market, but by showing you’re serious, and offering to have a survey undertaken as soon as your offer is accepted, cannot harm your chances.

3. Leverage your relationship with the seller

Whether or not you manage to get the property taken off the market, getting to know the sellers is always helpful and reduces your risk of getting gazumped.

Maintaining regular contact – keeping the seller informed of where you are in the buying process – is the foundation stone for a trusting bond between the two of you. And, the more the seller trusts you, the more time they will give you to get things sorted.

Be warned, however, that agents tend to try and keep clients from contacting each other. Legally though, there is nothing that they can do to stop you from exchanging emails and keeping in touch.

4. Lock-Out Agreements

Another thing to consider when gazump-proofing your move is the possibility of a ‘lock out’ agreement.

A lock-out agreement is a contract between buyer and seller that gives they buyer exclusive rights to buy the property within a certain timeframe. Once more, the seller must be on board with this, and you will need to show the seller that you are genuinely serious about buying their property.

Also, it must be said, lock out agreements do cost money – so consult your conveyancing solicitor first about the costs of drawing up the agreement.

5. Home Buyer Protection Insurance

As mentioned, gazumping can have financial implications on prospective buyers, and this can form a large part of the trauma of being gazumped.

While there’s little you can do to lessen the emotional upset of gazumping, you can to a great extent take the financial implications out of the equation – by purchasing Home Buyer Protection Insurance.

Home Buyer Protection Insurance pays you an agreed sum to cover the losses of fees in the event of you being gazumped. If you’re going to get gazumped, you’re going to get gazumped. But if you’re going into the buying process with insurance, you’re going in with peace of mind.

6. Pre-Contract Deposits

The fight against gazumping has seen new avenues of security being explored by buyers, one of them a so-called pre-contract deposit. This is a payment – often in the region of £1,000 – designed to prevent gazumping and offer both buyer and seller more security.

Payment of the deposit ensures a property is taken off the market, essentially letting the buyer ‘reserve’ it. If the sale goes through, the deposit comes out of the final price. However, if the sale falls through for no ‘good reason,’ the deposit is then paid to the seller.

On the seller’s side of things, a pre-contract deposit marks out serious buyers from time-wasters. If someone is not completely committed to purchasing the property, it’s unlikely that they are going to part ways with £1,000 – so the deposited money works to the advantage of both parties.

If you want a property taken off the market and have some spare liquidity, it may be worth seeing if you can agree a pre-contract deposit for the property in question. While pre-contract deposits are still quite rare, they are gaining in popularity as people seek better ways to gazump-proof their move.

7. Of course: gazump the gazumpers

This is where things get interesting. If the house you’ve been gazumped on is the home of your dreams and you have a little more money in the bank, you can, of course, gazump the gazumper.

Gazumping is a legal act and you are allowed to do it back to those who do it to you, but don’t get carried away. Beware overstretching yourself financially. And remember: just because you have gazumped them back, that doesn’t mean they won’t come back with a still higher counter-offer.

Towards a Gazump-Free Future

While gazumping is still legal in the UK, it has been reported that ministers are looking to introduce new legislation to clampdown on gazumping and reduce the stress of buying a home.

During his time as the Communities Secretary, Sajid Javid announced a call for evidence to improve the experience of home buying and selling, aiming to make it “cheaper, faster and less stressful” for those involved.

One of the main targets of the legislation was gazumping, with ministers looking at what could be done to reduce its prevalence in the home-buying industry.  Whether this will involve new types of lock-out agreements, changing the point at which a sale becomes binding, or finding a more efficient method of conveyancing and surveying, remains to be seen. But it’s refreshing to know something is being done to assist home buyers.

McGazumping: Buying in Scotland

If, after reading all of this, you’ve now been put off buying a house in England, there is another option available to you: move to Scotland. Yes, Scotland: the land of bagpipes and free university fees is also a great place for home buyers.

Gazumping is as legal in Scotland as it is in England and Wales, but it’s a very rare thing. In Scotland, solicitor estate agents sell the majority of properties. These agents are bound by the Law Society of Scotland’s guidelines, and these are intended to prevent gazumping from happening.

Once a solicitor acting on the behalf of a seller has accepted an offer on the property, they are not allowed to accept any subsequent offers from another party. If there is a later offer that the seller wants to accept, the solicitor has to withdraw from acting on the behalf of the seller and the seller must then find someone else to carry out their legal work.  Of course, there is nothing to prevent the seller from doing this, but changing solicitor is something that is relatively rare, as it will delay the sale going through.

… Gazundering

For all the talk about gazumping, there is also another phenomenon in the housing market that wreaks havoc on potential sales: gazundering.

Gazundering is where the buyer lowers their offer at the last minute, just before the contracts are exchanged. Often the seller, conscious that refusing the offer will send them back to square one, is forced into a corner and feels like they have to accept the lower offer.

Gazundering, like gazumping, is completely legal and there is nothing stopping the buyer from dropping their offer before exchanging the contracts. There are, however, a few steps sellers can take to prevent gazundering from happening.

  • Keep your price realistic and don’t put the property on the market at way over what it’s worth.
  • Stay in touch with the buyer: maintaining a good relationship and ensuring things move along quickly makes buyers much less likely to try and pull the rug from under your feet when it comes to the contract exchange.
  • Don’t try and hide anything about your property or the area it’s in. A survey will reveal any problems with the property itself, and most buyers will research the area – so everything will, ultimately, come to light during the buying process. And, if there are serious underlying issues, the buyer is well within their rights to withdraw their offer or lower it to account for them.

So there we have it: everything you need to know about gazumping and what you can do to avoid it. Sadly, there’s no way of knowing if you’re going to be gazumped, and you may be one of the unfortunate people who lose a property at the last hurdle. But, if you’re in the buying market, make sure you’re prepared, organised and ready to complete your purchase as swiftly and smoothly as possible – that will give you the greatest chance of success.