How to Avoid Gazumping
Gazumping is a controversial practice which means when a seller accepts a higher offer on the property from a second buyer while in the process of selling the property to someone else. This usually ruins the sale for the original buyer and forces the original buyer to either offer a higher bid or lose the purchase. About 18% of British house sales, amounting to some 200,000 transactions, fall through every year due to gazumping. Gazumping is not a problem in Scotland as once an offer is accepted, it cannot be withdrawn.
It is a source of frustration and disappointment to the buyers who think by accepting the seller’s offer they have secured the deal only to find out that have lost their dream home to someone else. This is particularly stressful to buyers if they have ordered searches and remain liable to the surveyor’s costs and their lawyer’s fees which can run into thousands of pounds.
There are various ways you can safeguard against being gazaumped.
1. Insist that the property is removed from the market. When you make an offer insist on the property being removed from the market as a condition of your offer.
2. If you are selling a property to buy another property, make sure that your property is under offer before making an offer for your purchase. This will minimize the risk of delay in the transaction and your seller will not look for another buyer.
2. Obtain your mortgage offer as quickly as possible to allow your conveyancer to be in a position to exchange once they have the results of the searches and the replies to their inquiries.
4. Make sure the estate agent has signed an agreement with the seller that they will turn down any future offers after your offer is accepted.
5. Finally, you may want to enter into a formal exclusivity agreement with the Seller preventing them to market the property while your solicitor is carrying the due diligence. This will involve paying some additional fee to your solicitor but you will legally safeguard against any potential gazaumping by the Seller.
Finally, if you are gazumped, keep contact with the agent and the seller and let them know that you are still interested in the property so if the new buyer for any reason pulls out you will be next inline.
By Alireza Nurbakhsh