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Purchasing a home can be one of the most exciting life milestones, but it can also be fraught with stress and uncertainty. One of the most frustrating and disheartening scenarios a buyer can face is being gazumped. According to recent statistics from the Home Owners Alliance, gazumping has increased by 6% this year, with more buyers falling victim to this practice. If you’re planning to purchase a property in the current market, it’s crucial to understand what gazumping is, why it’s on the rise, and what steps you can take to avoid it happening to you.
What is Gazumping?
Gazumping occurs when a seller accepts a buyer’s offer on a property, but later pulls out of the agreement after receiving a higher offer from another party. Essentially, the seller backs out of the original deal in favour of a more lucrative one, leaving the initial buyer disappointed and potentially out of pocket for any costs incurred during the process, such as solicitor’s fees or surveys.
The term “gazumping” is mainly used in the UK, where the legal framework for property purchases means that an agreement isn’t legally binding until contracts have been exchanged. This differs from other countries where verbal agreements or accepted offers may be more formalised.
Why is Gazumping on the Rise?
The housing market has been particularly volatile in recent years, with increasing demand for homes and a shortage of properties available for sale. This imbalance has created a highly competitive environment, where sellers feel emboldened to accept higher offers even after agreeing to sell to someone else. There are several factors contributing to this rise in gazumping:
- High Demand for Homes: In many areas, particularly in cities or sought-after locations, demand far exceeds supply. This creates a bidding war, with buyers willing to outbid others even after an offer has been accepted.
- Rising House Prices: With house prices continually climbing, sellers are often tempted by the prospect of securing a higher price. This makes gazumping more likely, as some buyers are willing to offer significantly more to secure the property they desire.
- Delays in the Buying Process: The longer the buying process takes, the more likely it is that a seller may receive a better offer. Delays can be caused by anything from mortgage applications to legal paperwork, giving other buyers a chance to swoop in with a better offer.
- Lack of Regulations: In the UK, until contracts are exchanged, there is little to stop sellers from changing their minds. Unlike other countries where a sale is binding once an offer is accepted, the UK’s property market allows for gazumping until the final paperwork is signed.
Practical Steps to Avoid Being Gazumped
While gazumping can be disheartening, there are steps you can take as a buyer to reduce the chances of it happening to you. Here are some practical tips:
1. Move Quickly
Time is of the essence when it comes to purchasing a property. Once your offer has been accepted, it’s crucial to move quickly to avoid delays that could open the door to gazumping. Have your mortgage in principle, solicitors lined up and surveyors ready to act as soon as your offer is accepted. Being proactive can reduce the chances of another buyer swooping in with a better offer.
2. Request the Property Be Taken Off the Market
One of the best ways to avoid gazumping is to request that the seller takes the property off the market as soon as they accept your offer. This means the property is no longer visible to other potential buyers, reducing the chance that someone will come in with a higher bid. While some sellers may hesitate to do this, it’s worth requesting, especially if you can demonstrate that you’re serious and ready to move quickly.
3. Build a Good Relationship with the Seller
Creating a rapport with the seller can sometimes work in your favour. Sellers are human, and a good relationship might make them think twice about gazumping you. Personal touches, such as explaining why the home is perfect for you and your family, can make sellers feel more connected to you as a buyer, making them less likely to back out in favour of a faceless higher offer.
4. Consider a Lock-In Agreement
Although relatively uncommon, a lock-in agreement (also known as an exclusivity agreement) can protect you from being gazumped. This legally binding contract commits the seller to exclusively work with you for a set period. In return, you may have to pay a deposit or cover certain costs. While it doesn’t guarantee that the sale will go through, it does provide legal recourse if the seller backs out in favour of another buyer.
5. Be Prepared to Match a Higher Offer
In some cases, gazumping may happen despite your best efforts. If this occurs, consider whether you’re willing and able to increase your offer to match or beat the competing bid. However, be cautious about overextending yourself financially. It’s important to stay within your budget and not get swept up in a bidding war that could leave you struggling to afford the property in the long term.
6. Get Insurance for Gazumping
In response to the increasing frequency of gazumping, some companies now offer insurance policies that cover the costs incurred if you’re gazumped. These policies typically reimburse you for expenses like survey fees, legal fees and mortgage arrangement fees if the sale falls through due to gazumping. While it won’t stop the emotional disappointment, it can soften the financial blow.
Stay Vigilant, Stay Informed
Gazumping is a frustrating reality of the UK housing market, and with cases on the rise, it’s more important than ever for buyers to stay vigilant. By moving quickly, maintaining open communication with the seller and considering additional protections such as a lock-in agreement or insurance, you can reduce your chances of being gazumped.
As a prospective buyer, staying informed and prepared is key to navigating the complexities of the often competitive housing market. If you’re ready to take the next step in your property journey, our team at Lovelle Estate Agents is here to help you every step of the way. With our expert knowledge and dedicated service, we’ll guide you through the process and help you find the home of your dreams with confidence and peace of mind.
