What is Gazumping and How Does It Affect Your House Sale?
Estimated reading time 6 minutes
If you saw our recent blog, we discussed gazundering and how it affects your house sale. You might remember, it can be quite troublesome and disrupt what was otherwise a smooth sale process. Similar to gazundering is gazumping, another process where the sale of a home can be delayed or even cancelled.
You’ve found a house on the market, fallen in love with it, and made an offer. The owner accepts and all looks good. You get on with getting your house sold, hosting viewings, and entertaining a host of offers. You finally accept one and then your solicitor gets in touch. The house you were ready to buy will no longer be yours. Someone else has snuck in with a higher offer and the seller has accepted it. You’ve been gazumped.
This now resets the whole process for you as not only are you on the hunt for another property to buy but you’ll likely have to cancel the sale of your home too.
What is gazumping?
Gazumping is the term given to the practice of a potential buyer coming in with a higher offer than one that has already been accepted for the property and the seller accepting it. This forces you into the position of either making a higher offer (if it’s affordable) or pulling out of the purchase altogether, causing havoc to the rest of the chain that is linked to you. It can happen at any stage before contracts are exchanged and therefore does not break any rules.
This seems harsh, is gazumping illegal?
Unfortunately, it is not. Just like gazundering, this slightly immoral practice is not illegal, giving buyers the chance to thwart the plans of others by taking them out of the equation at the last minute. For some, the lure of a higher offer is too much to turn down and despite moral objections, it will be accepted. Others understand the issues gazumping can bring and will take your offer as the one they proceed with.
Why do people gazump?
Reasons prospective buyers gazump vary. In some cases, gazumping isn’t intentional. A house is seen for sale and even though it is SSTC (sold subject to contract) it is still technically available. It might well be that on the off chance it is accepted, a buyer makes an offer in the hope it aligns with the seller's pricing. If it does and is better than anything that’s already been offered, they may well accept.
Other times, gazumping might be more tactical. A potential buyer may know that if they jump in at the last minute with a high offer, the pressure on the seller to accept it can sometimes catch them off guard and see them wowed by the new numbers in front of them.
Sometimes gazumping stems from issues caused by you. Even if unintentionally. If you have been slow to act with completing any paperwork, have had problems with organising the survey or are erring on the side of caution with a few minor details, you slow down the entire process and leave yourself open to being gazumped.
How can I stop being gazumped?
With it not being illegal, sometimes, you just have to hope no other offers come along. However, you should remember that if an offer were to be accepted after you have exchanged contracts, there would be a breach of contract, and the seller would be facing huge financial penalties, and you might still even end up with the house.
It doesn’t normally happen this way though. In most cases, you’ll find a bigger offer comes in before things get legally binding. You can do some things to help reduce the chances of this happening.
Have paperwork in order
The more prepared you are, the faster you can move and reduce the chances of being gazumped. Have your mortgage agreement in principle in place and have a solicitor ready to get all of their work completed. Conveyancing can take time so getting on top of it early can get you closer to the legally binding contract exchange.
Get home buyers' insurance
This won’t protect you from being gazumped but it will help you recover costs should the unfortunate happen. Should the seller have decided that this new, bigger offer is how they wish to proceed, you can get back some of the costs you have paid to get the process to the stage it is at.
Speak to the sellers
If you can build a rapport with the sellers or their representatives, you might be in a position to ask if the home can be taken off the market. This doesn’t always go down well as they will understandably be concerned that your offer may fall through. If you can prove your commitment to the purchase though, they might agree. This then reduces the chances of further offers coming in.
Keep communicating
Keep communicating with the sellers, your solicitor and the estate agent if need be. Keeping people up to date with the progress of the move will help things move quickly and give added reassurance to the seller that you aren’t going to back out.
Secure a lock-out agreement
This may add some extra cost to your property plans but could go some way to ensuring nobody else steps and gazumps you. These agreements state that upon acceptance of your offer, you have exclusivity to buy the property within a set time period. A seller may be more than happy to sign as they know a sale is forthcoming.
What problems does Gazumping cause?
In simple terms, gazumping stops you from securing the home you wish to buy and disrupts the sale of your property too. With the chain broken at both sides of your link, you have nowhere to go and have to start the process all over again. Not ideal if you were looking to sell your house fast.
An alternative that could stop this from happening is to speak to a cash house buyer. For example, at Bettermove, we buy any house and keep everything chain-free. We simply make an offer on your home, and should you accept it, we buy it. This can be completed in a timeframe that suits you and comes at no cost either. You then receive the cash in your bank ready for you use for the purchase of a new home.
