Even when you’ve done everything possible to secure your dream property, there are still a few stages where things can go wrong. One of many hitches faced by the buyers when purchasing a property is gazumping. It is an ugly practice which can be both financially and emotionally draining for the buyer.
What is Gazumping?
It’s a term used in the property market, where a seller accepts an offer from one buyer, but then accepts another offer from someone else at a higher price. This puts the first buyer into a catch22 situation, he either has to offer a higher price or withdraw from the deal and continue looking for more options. The practice usually happens when market prices are on the rise and the number of buyers exceeds the number of sellers.
Gazumping typically happens since the sale agreement is not legally binding until the contracts have been exchanged. Once the seller accepts the offer from a buyer, either the buyer or the seller can withdraw at any time before the exchange of contracts. However, sometimes timing can also be an issue; for instance, if a buyer is taking too long to have a survey conducted or the solicitor is delaying the process, then the seller may decide to reject the offer in favour of the buyer who is in a better position to move quickly.
How to Avoid Gazumping?
Although nothing can be done, there are certain ways in which a buyer can minimise the risk of being gazumped, such as;
- Speeding up the buyer process will leave less opportunity for the seller to pull out.
- If possible, choose a seller whose agent has a policy on gazumping. The policy could insist that the seller signs an agreement that he will turn down any other offer after one has been accepted, although it’s unlikely you’d get a seller to sign this agreement.
- Keep the seller’s agent informed about each step such as; when you have completed the survey and received a formal mortgage offer. This might be helpful since they will be assured that the sale is progressing.
- The buyer can insist on getting the property removed from the open market and getting a board placed outside the house with a ‘sold’ sign on it.
However, if you have done everything to avoid getting gazumped and know that a higher offer has been made, then the only option is to review your finances and see if you can crack the deal. Be very sure that you don’t overstretch your budget in the heat of the situation.