Gazumping is the term used when a property seller accepts your offer, you proceed with your purchase and instruct a Solicitor. You may also pay for searches, valuation and instruct a lender.
Then you are notified that the seller has accepted a higher offer from someone else. You are then left in the lurch not knowing what to do.
Can you do anything to recover the money and time you have already spent? Is the seller bound by the verbal agreement? Should you offer a higher amount or walk away from the transaction?
Unfortunately, until contracts are exchanged the agreement between you and the seller is not legally binding and either party can withdraw from the transaction. There is very little you can do to protect yourself or recover any money already spent.
Top Tips to Reduce the Possibility of Gazumping
- Timing is everything – The quicker you can move the less time the seller will want to accept a new offer. Speak to the estate agent to understand the seller’s expectations and timeframes. Can you meet these timeframes?
- Build a positive relationship with the seller and the estate agent and keep them informed of your progress. When you place your offer advise the estate agent and the seller of your timeframes and expectations.
- As part of your offer consider asking the seller to remove the property from the market. Some sellers and estate agents will be reluctant to do this but it is worth asking.
- Consider offering on the basis that exchange of contracts should take place within a set time. However, before you do this make sure you can meet this timeline [link to buying and selling process].
- Ask the seller if they are prepared to enter into a pre-contract deposit agreement. If this is agreed the usual terms will be that both parties pay a percentage of the deposit which is held by a third party. Exchange of contracts is discussed and agreed by a certain date. If contracts are not exchanged by the agreed date and one side pulls out then the other party will keep both deposits.
Note: Where there are more buyers than sellers in the market, gazumping is more likely to occur.
In a slow property market where there are more sellers than buyers it is more common for gazundering to occur.
Gazundering is the opposite of gazumping, it is when a property seller has accepted an offer from a buyer. The seller then may proceed with their related purchase and make plans to move house. They may decide not to have any further viewings having accepted the buyer’s offer. Near to exchange of contracts the buyer will then significantly reduce their offer. The buyer is then left in the lurch as they may be relying on the money from the sale to fund their purchase.
The dilemma is whether to accept the lower offer resulting in the seller having to fund the shortfall on any related purchase, or refuse the offer and remarket the property. By remarketing the property the seller could then risk their related purchase if they cannot find a new buyer.
Top Tips to Reduce the Possibility of Gazundering
- Timing is everything – The quicker you can move the less time the buyer may have to reduce their offer. Ask the buyer if they can meet your timeframe before you accept the offer.
- Know your property and the market. Ensure you market your property at a realistic price which may negate the need for the buyer to reduce their offer.
- Be realistic about any defects in the property and the cost of remedying the defects. The buyer may consider defects as an issue later in the transaction e.g. when a survey has been completed.
Sarah Ryan is a Licensed Conveyancer, a Chartered Legal Executive and Head of Conveyancing at Co-op Legal Services. Sarah is also a Justice of the Peace sitting at the North East Wales Bench.
For a free, fixed fee Conveyancing quote please click here.