Wed 01 Jun 2016
Gazumping – what is it and how can you avoid it – by Max Sowerby
What is gazumping?
It comes from the Yiddish word ‘gazump’ which means to cheat or steal. In the terms of property it means when a seller accepts an offer from a buyer, then before exchange of contracts, accepts a higher offer from a 2nd buyer.
Why does it happen?
It can happen for a number of reasons, such as the property wasn’t marketed fully so the new buyers became aware after a decision to accept was reached. Or someone who previously looked are now in a better financial position to proceed i.e. sold their own house. Sometimes people need to have the confidence of other people’s commitment before they commit themselves. Rising house prices.
The agents obligations
It is a legal requirement that an agent must report all offers to the owner.
The sellers obligations
The seller has no legal obligations either way unless a 'lock out' agreement was signed, or contracts have been exchanged.
What can you do to minimise the risk of gazumping?
The seller -
Agree a realistic asking price and make sure that the property has been extensively marketed.
Have a good relationship with your agent who can give you their best advice whether to accept an offer.
Agree with your agent your instructions on your acceptance of an offer in regard to ongoing marketing. i.e. sale agreed, remove from sale etc.
The buyer -
Maintain a very good relationship with the seller and the agent, keeping them informed of your situation.
Be ready to act quickly, the sooner you can exchange contracts, the less risk. Have in place – conveyancing solicitor, mortgage if needed in principal, surveyor.
As part of your offer, ask for the property to be removed from the market or shown as under offer.
It is possible for your solicitor, with agreement from the seller, to have a ‘lock out’ agreement where both parties pay a deposit, which subject to terms and conditions will pay expenses if the sale falls through.
It is also possible to purchase insurance to protect your costs if this occurs. At Sowerbys for instance, if you use our mortgage services you will automatically be covered against any financial loss up to £1000.
A good agent comes into their own from offer to completion. With the long drawn out legal system there is many a slip. Find an agent you can trust and see face to face to keep things on track. On the whole we don’t see many occasions when gazumping happens as we have marketed the property extensively and have helped bring the sale through to a swift conclusion.
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