Unfortunately, gazumping is a fairly common occurrence, especially when property prices are rising, and there are more buyers than properties. We explain why it happens and what you can do to reduce the risk of it happening to you.
Asking someone if they’ve ever been gazumped on a property purchase is like asking if they’ve ever been dumped. It’s highly likely. It happens to the best of us. Unless you’re a first-time buyer, the chances are you’ve probably had your dream home snatched away from you at a moment’s notice at some point in your life.
What is gazumping?
Gazumping is when another buyer emerges with a higher offer on a property you’re already in the process of buying, and the vendor accepts their offer. This can happen at the last minute and leaves you back at square one, having to search for another property. It’s frustrating and can be expensive as you will have already incurred solicitors’ fees and the cost of a survey. Unfortunately, being gazumped can occur at any time before you exchange contracts, and of course, the nearer you are to completing the purchase, the more costs you will have incurred.
This act is illegal in Scotland but remains a fairly common occurrence in England and Wales. Unfortunately, it’s also on the rise, largely due to significant property demand, with more buyers than properties. In April, Market Financial Solutions (MFS) surveyed 524 adults and found that 31% had been gazumped at least once since 2012.
Unfortunately, some 26% surveyed also admitted to gazumping someone else. Not surprisingly, the MFS survey showed that four in five homebuyers want to see gazumping outlawed in England and Wales.
If you’re a home buyer, is there anything you can do to reduce your risk of being gazumped? While it’s impossible to predict the behaviour of someone you don’t know, there are some things you can do that may help reduce the risk…
Be ready with your paperwork
Have an Agreement In Principle (a letter from a broker or lender revealing how much you could borrow) that you can show to the vendor. This proves you’re a strong buyer able to commit to the purchase.
Get the vendor to take the property off the market
If your offer is fair and genuine, they should do this. Convincing the vendor your mortgage has been approved is helpful, so having an AIP letter is worthwhile.
Have a solicitor lined up
Again, preparation is key. Make sure you have a solicitor ready to act on your behalf and share their details with the vendor as soon as possible. The more efficient you are, the better.
Get the survey organised quickly
If the vendor knows you’re serious about buying their property, they may be less likely to gazump you, even if they receive a higher offer. The property market is unpredictable, and so are prospective buyers – they will know this. If you can demonstrate you are genuine, they’re more likely to stay true to their word. The faster you act, the easier it will be for the vendor to see that you mean business.
What if someone tries to gazump you?
If you have done all these things and you’re still gazumped, you may think it’s worth making a higher offer to counter the new buyer’s offer. This carries some risk, as it means you’ll have to borrow more and may be overstretching yourself. Being gazumped also shows that your vendor is prone to changing their mind and can be unreliable.
If your vendor says they are considering accepting a higher offer, you can point out all of the benefits of sticking with your offer. Tell them you’re able to move swiftly and you’re flexible on the moving date. If you’re a first-time buyer, remind them the sale is likely to be faster and less complicated than if you were in a chain.
Ultimately though, if the vendor has made up their mind to go with the higher offer, there’s nothing you can do.
If you are gazumped, you may be reluctant to start looking for another property immediately. You may not want to risk getting your hopes up and being let down again. That’s understandable, but you can usually tell if a vendor is serious about selling.
Spotting an unreliable vendor
Signs of an unreliable vendor include someone who won’t budge on the price and a history of stopping and starting sales. In other words, if you’ve seen the house go on and off the market several times, they may not be serious about selling. In addition, if the house is in poor condition when the vendor is living there, they may not care about making it appealing to prospective buyers, which could be a red flag.