Gazumping might sound like the pastime of an alien or monster from a children’s book, but it’s actually a property term. You might have just started your house hunting process and be none the wiser, or you have received that dreaded phone call from your solicitor after having had your offer accepted for your dream house. Oh no, you think, what’s happened now?
“Hello, it’s your solicitor - I’m afraid you’ve been gazumped”.
Well, there’s no need to be stumped. In this article, we’ll clear up what this mystifying term means, and what to do if you’re gazumped after putting in an offer for a property.
This guide will also help anyone buying a property in the UK understand if gazumping is legal.
Whether gazumping is legal
How you can prevent being gazumped
If you can sue for gazumping
What is gazumping?
Gazumping is when someone else makes a higher offer for a house than someone whose offer has already been accepted.
Another bidder can come in at this late stage of the house buying process and present the same offer as you, but promise to complete the sale process more quickly. This could be because they have a smaller chain, aren’t selling their own home so have no chain at all or can buy the house in cash.
The seller has every right to accept a better offer, unfortunately. We understand the frustration this can cause, during a time when you are planning your future and making the biggest financial commitment of your life.
Gazumping can mean you lose any money you’ve already spent in scoping out the house, including surveys and solicitor’s fees.
But, there are ways to fight gazumping!
Is gazumping illegal?
Gazumping is legal in the UK. Before you sign contracts, a seller is free to accept an offer from anyone. As you might imagine, gazumping is frowned upon in polite society, however it’s not illegal.
Gazumping is seen less in Scotland; this is because most estate agents are also legal professionals. The Law Society in Scotland doesn’t allow gazumping however it still sometimes takes place.
How do I stop being gazumped?
There are ways to minimise the risks of being gazumped at the final hurdle of the house buying race. Unfortunately, there is no certain way to avoid this frustrating practice. As mentioned, the seller is always entitled to accept another offer over yours.
Some key steps you can take include:
Getting an agreement in principle (AIP) – this is a precursor to getting a full-blown mortgage. As a stepping stone to a mortgage, by giving you an AIP, a lender is effectively giving you the seal of approval to borrow money, as long as certain terms are met. An AIP can accelerate the buying process
Have paperwork to hand – have all the necessary paperwork completed and organised so you can access it quickly. Stay in touch with your solicitor to ensure they are on top of the process and double check they have all the documents they need
Complete surveys quickly – get your survey arranged and completed as soon as possible and put your offer in. The less time wasted, the lesser the chance you’ll be gazumped
Pre-arrange legal support – make sure you have a solicitor in place before starting the bidding process for a new house. You’ll require a solicitor to complete the paperwork for you
Get homebuyer insurance – this can limit some of your losses from survey fees
Ask for the property to be taken off the market – sellers don’t have to do this, but it is a great way to limit the chances of a higher offer being made. Of course, someone might have seen the marketing before the house was removed from the market and come in with a higher offer, but taking the property off the market stops potential new buyers becoming interested
Form a relationship with the sellers – sure, some sellers may be off-hand with potential buyers, but It’s worth spending the time being friendly with the sellers and letting them know just how serious you are about buying their home, and how much you love their property and will take care of it
Ask for a lock out agreement – this is a contract between you and the seller, where you agree that you have the exclusive right, within a set time period, in which to buy the property. Obviously, the seller would need to put a lot of faith in you to sign, but for some sellers this expression of intent can help them relax. This tactic is often suitable for sellers that want to sell quickly or have had a sale collapse. So, always try to establish the history of the sale if you can.
What is gazundering and is it legal?
Although it sounds like a Dickensian form of outdoor pursuit, gazundering, like gazumping, is when a buyer derails the house buying property at the last minute. In gazundering, a buyer withdraws their current offer and makes a new offer for less.
So, should you gazunder if everyone seems to be trying to gazump you anyway?
Firstly, it can be a risk to attempt to gazunder your current offer. It’s a gamble because you don’t know if the seller will accept a lower offer - it can be an educated guess if you get wind from your agent that the seller wants to move quickly. It can also benefit the seller to continue the sale for less than the list price if they don’t have other offers and are reluctant to accept the costs of re-marketing the property and paying conveying fees.
Unsurprisingly, gazundering is considered unethical, but it is a common practice. So, something worth considering in the right circumstances.
Can you sue for gazumping?
Yes - if the seller pulls out of the deal after the contracts have been exchanged, you can sue the seller for your losses. You also might be able to keep the deposit.
Before choosing whether to sue the seller, you should seek legal advice as this can be a complex and stressful drawn-out process.
For help and guidance on property matters, get a free case assessment from our legal assessment team today.