How Can Exclusivity Agreements Eliminate Gazumping?
Estimated reading time 8 minutes
Buying and selling a property is stressful. Paperwork, price negotiations, property chains. Sometimes, when in the depths of selling, the process may make you feel like staying in your current home is a better idea. However, a new house brings new adventures, and of course, a chance to make a profit should you come to sell.
Unfortunately, things can grind to a halt when you get gazumped. The house you thought was yours can be snatched away by another interested party making a higher offer. If only there was some way to lock in the property and remove that risk altogether….
Well, there is! In this guide we dive into how an exclusivity agreement can save you from being gazumped and ensure that the home you made that offer on can still be yours.
What is gazumping?
Gazumping happens when a seller accepts a higher offer from a different buyer after already agreeing to sell to you. This means you lose out on the property despite having a previously accepted offer.
This can be a nightmare scenario for both parties, despite it seeming a wise move as a seller. The initial buyer has now lost out on the home they thought was going to be theirs and spent plenty of cash along the way trying to secure it. The seller now has to hope this new buyer keeps to their word and fulfils the higher offer they made and doesn’t end up pulling out at the last minute.
Gazumping is not illegal. But, within property circles, it is frowned upon. A lot of work has gone into selling the home, a lot of work has gone into buying the home, and then someone comes along and rocks the boat. This extends the wait time for completion and could leave the first party in a tricky situation, especially if they had been banking on landing this house. This is why many property firms are now looking at exclusivity agreements and legally preparing properties for sale with as much “up front” info as possible before they go to market. This then removes the risk of gazumping and ensures both buyer and seller remain happy and in a stable, secure position.
Exclusivity agreements and how they shield you from gazumping
Exclusivity agreements aren’t a widely discussed topic and finding a company which offers them can be like searching for a needle in a haystack. Fear not, the market offering such a service is expanding. At Bettermove we are leading the way with our exclusivity agreement offering.
Using our model as an example, when we sell a house, the interested buyer pays a deposit of £1,000. This locks the property in so that if another interested party were to offer more, the buyer wouldn’t find themselves being gazumped. This gives added security to the buyer as they know their accepted offer will be honored, and further security to sellers by ensuring any timewasters are removed. Once the sale is completed the deposit is returned to the buyer.
What is an exclusivity agreement and how does it work?
An exclusivity agreement protects buyers from gazumping. This means that even if someone else makes an offer on a property, the seller is contractually obliged to only negotiate with the buyer during the exclusivity period. The buyer will have exclusive rights to purchase the property until the agreement ends or in the unlikely event the buyer decides to pull out.
If we look at some figures for reference, back in 2021, Compare The Market revealed that 39% of buyers admitted to securing their new home by making a better offer after a sale was agreed with a previous party. In the same year, gazumping was the leading cause of property transactions not going through.
A more recent report from the Home Owners Alliance published in June 2024 discovered that gazumping is on the rise, highlighting that exclusivity agreements are now becoming essential. In this report, it was uncovered that 37% of buyers were now being gazumped, a jump of 6% compared to the previous year.
We might be veering off course a little with all this talk of gazumping but it’s vital we talk about it when explaining how an exclusivity agreement works. If we look at it in monetary terms, buyers with no exclusivity clause that encountered gazumping lost money in 59% of cases at an average of £2,400.
An exclusivity agreement would stop this. The exclusivity agreement sets processes in place, for a small refundable deposit, where no other offers will be accepted, even if they are higher than the one already accepted. Peace of mind for the buyer, peace of mind for the seller and a happy estate agent who has managed to satisfy the needs of both parties.
What should an exclusivity agreement contain in order to stop gazumping?
Each company will have their way of presenting an exclusivity agreement and some may be more favourable to you than others. By choosing a company like Bettermove, who offers an exclusivity agreement, both buyers and sellers can reduce the risk of gazumping, ensuring a smoother and less stressful property transaction."
An exclusivity agreement should include:
- Name(s) and contact details of both the buyer and seller
- The date the agreement is scheduled to begin
- Full details of the property the agreement relates to
- A set duration for the exclusivity agreement to last
- Conditions that may see the agreement extended or even terminated early
- The obligations of the seller such as not accepting any other offers and making the property accessible for surveying etc.
- The obligations of the buyer such as committing to obtaining the finance required for the purchase, and conducting the relevant due diligence required for buying a property
- Terms under which termination of the agreement is allowed
- Consequences for a breach of the agreement
- Notice of how disputes may be resolved
Each company will have exclusivity agreements with differing features so the above should not be taken as standard. All features of the agreement could also be negotiated by either side so it’s worth thinking of what you want from it. The longer you try and get an agreement smoothed out, the easier it is for someone to gazump you before the agreement is finalised.
Is an exclusivity agreement legally binding?
The terms of an exclusivity agreement may stop you from being gazumped, but only for a while. Once the agreement expires, if a sale has not been completed, the seller can remarket the house and possibly sell it for even more than you had agreed with them.
The benefits of an exclusivity agreement for buyers
Buying a home can be stressful; it’s a competitive market and demand often outweighs supply. Having an exclusivity agreement in place can help keep you in line to secure the property and not get pushed out by other interested parties. Removing the opportunity to be gazumped is one of the key reasons buyers look to lock in such an agreement but there are plenty more:
- Reduced risk of withdrawal from seller. With a set period for the agreement to run, a buyer can continue with searches and other legal costs without fear of the seller walking away.
- Plenty of time for due diligence. Searches and other background work is perhaps the part of a property purchase that takes the most time and can delay the transaction. With an exclusivity agreement in place, the buyer has plenty of time to set the wheels in motion, so completion becomes quick and easy.
- Heightened security. Not everyone wants to gazump you, but they may still want to make an offer on the property you want. The exclusivity agreement stops any other offers being entertained by the seller whether they be lower, higher or the same as the offer you made.
How does an exclusivity agreement benefit sellers?
The exclusivity agreement may help prevent gazumping, which is always beneficial for the buyer, but the seller stands to benefit too.
- Genuine buyer commitment. Knowing a buyer is serious about buying your home helps reassure you that you are unlikely to be let down. With a deposit paid by the buyer, the seller only has to focus on one party rather than entertaining lots of potential suitors and complicated negotiations.
- Streamlined process. With just one party to work with and clear timelines in place, it no longer becomes a case of “if” the house sells, just a case of “when”.
Exclusivity agreements can bring much-needed peace of mind to both buyers and sellers. The removal of gazumping fear is a relief, predominantly for the buyer but also the seller too. Offering a streamlined route to sale, without worry of last-minute complications can make the desired sale happen fast and a dream home be acquired quickly.
Interested in Bettermove’s exclusivity agreement?
At Bettermove, we put the needs of those buying and selling first. When we sell a house, the buyer can pay an affordable exclusivity deposit. This means that should someone come along with a better offer, the buyer doesn’t miss out. No risk of being gazumped, just added security and a removal of those who may over-promise but under-deliver.
Looking to buy? You’ll have no fear of being gazumped. Why not look at our properties for sale now?
