Gazumping: What is it and how can you avoid it?
The process of buying a house is an expensive one, but can you imagine paying hundreds of pounds in legal fees only to be told that somebody else will be moving into your dream home?
Whether you’re a first-time buyer or you’re buying a second home, you could be affected by gazumping – but what is it? Is gazumping illegal? And how do you know if you’ve been gazumped?
What is ‘gazumping’?
Gazumping occurs when the seller of a home reaches a verbal agreement with a potential buyer, before accepting another (usually higher) offer from another party. In some cases, the other offer may not be higher, but might be from a buyer who does not need to sell their own home to secure adequate funding.
The ‘gazumping’ meaning can also refer to the seller of a home increasing their asking price at the last minute, before contracts are exchanged, in an attempt to pressure the buyer into paying over the odds.
Is gazumping legal?
Sadly, gazumping in the UK is very much legal - until there has been an official exchange of contracts, the seller of a home is well within their rights to adjust their asking price.
Similarly, the seller can also choose to withdraw from the sale altogether, no matter how much money you have spent on solicitors, conveyancing and legal fees.
Why is gazumping bad?
After all, every seller wants to maximize the money they receive for their home, right?
That’s true, but the impact it can have on the buyer can be detrimental – in some cases, it could damage their chances of going ahead with buying another property in the near future.
This is because it is likely that they will have already paid a lot of money for a lawyer and conveyancing fees when the offer was verbally accepted. If the deal is off then all of this money has simply been wasted, and with the cost of buying a house being so high, some may not have the funds available to go through the process again anytime soon.
Being gazumped can also be emotionally devastating – with an offer already accepted, the buyers will have probably started planning the more intricate details of moving home and having that snatched away at the very last minute can be a bitter pill to swallow.
Gazumping can also damage the reputation of estate agents, who may end up losing money in the future; despite their initial fee rising with the higher sale price.
How to deal with gazumping – what to do when you are gazumped
Unfortunately in most cases, there isn’t a lot you can do once you’ve been gazumped. Depending on how close to your budget you already were, you may not be able to beat the new-and-improved offer.
If you do have a bit of wriggle room in your budget then you might be able to gazump your gazumper (as ridiculous as that sounds), but it’s important that you take the time to consider whether the house is really worth the inflated price you’d be paying.
Another option you have is to persuade the vendor that they would benefit from selling the house to you, even at a lower price – perhaps you can offer a quick, chain-free purchase or can pay for the property without the need of a mortgage.
How to avoid gazumping
If you’re worried about being gazumped then your best option is to be prepared to move quickly when buying a new house.
Enquire about receiving a mortgage in principle to speed up the buying process and try to have the sale of your current home confirmed as early as possible. The longer you leave the seller hanging around, the more likely they are to accept an offer from elsewhere.
To minimize the potential impact of gazumping, you could insist that the property is taken off the market before you pay for a solicitor and surveyor, while there are also some estate agents that are sternly against the practice of gazumping that would be unlikely to accept another offer once yours has been agreed upon.
What is ‘gazundering’?
We’ve spoken about gazumping, but what about gazundering?
Gazundering is the complete opposite of gazumping and occurs when the buyer lowers their offer just before contracts are exchanged. This can occur when the buyer is aware that the seller is in a rush to sell the property and believes they could be pressured into accepting a lower offer.
Is gazundering legal?
Yes, like gazumping, gazundering is a completely legal practice – until contracts are exchanged, the buyer can change their offer by however much they please.
Is gazundering fair?
In most cases, a buyer will only gazunder the seller of a property because they think they can persuade them to part with their home for less money, usually because they know that the buyer will not want to re-enter the process of selling the house to somebody else.
There are times, though, when buyers have fair reason to gazunder the seller, such as if they find out a piece of information which could affect the value, or future value, of the property or if the cost of homes in that area have declined significantly since the offer was initially agreed. Some buyers may have underestimated the cost of legal and conveyancing fees and could try to pass those costs onto you by reducing their offer.
How to deal with gazundering
Apart from rejecting the new offer (and risking the sale falling through altogether), there isn’t a lot you can do to prevent the buyer from lowering their offer prior to contract exchange.
If you’re in the fortunate position of having several parties interested in your home, try to eliminate those who are in a chain (need to sell their home before buying). These buyers are more likely to get the deal secured ASAP and have less time to rack up additional costs.
You should also try to set a date on which you will exchange contracts, with the buyer then setting down an exchange of contracts deposit. Once this contract is signed, sealed and delivered, there’s no going back and the buyer cannot lower their offer.
When selling a house, remember to be realistic with your asking price – if a buyer loves your home then they may offer you the asking price at first, but don’t be surprised if, after seeking further advice, they reduce their offer.
The best way to avoid being gazundered is to be honest with your house listing. Remember that anybody who is buying your house is probably doing so because they really want to live there – admitting a few minor faults is unlikely to put them off. If the buyer finds out that you’ve been untruthful, there will be a level of distrust which could put the sale at risk.
Moving house? Let Bobatoo help
Whether you’re looking to take out a new home insurance policy, you need temporary van insurance to help move your belongings or simply need help planning your moving out checklist, Bobatoo’s handy guides are sure to be of great use to you.