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When buying a home you must be prepared for unexpected twists, especially since until contracts are exchanged, any agreement is not a legal one. One thing that can worry both buyers and sellers is the gazumping. In this article, we’ll dive into what gazumping means, when it is likely to happen, whether it’s legal and […]
07 February 2024
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When buying a home you must be prepared for unexpected twists, especially since until contracts are exchanged, any agreement is not a legal one. One thing that can worry both buyers and sellers is the gazumping. In this article, we’ll dive into what gazumping means, when it is likely to happen, whether it’s legal and the consequences of being gazumped.
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Gazumping refers to a situation in the property market where a seller accepts a higher offer from another buyer after initially accepting an offer from another buyer. This leaves the original buyer without a property to buy and, having invested time, money, and emotional energy in the transaction. It can also happen at any time during the period of being Sold Subject to Contract and before the exchange of contracts.
No. Gazumping occurs when a seller accepts a higher offer from a different buyer after initially accepting an offer from someone else. This often happens between the acceptance of an offer and the exchange of contracts. Gazundering, on the other hand, is when a buyer reduces their offer just before the exchange of contracts. This unexpected reduction can put pressure on the seller to accept the lower offer to avoid the collapse of the deal.
Gazumping can occur at various stages of the property buying process. It’s most common after the seller has verbally accepted an offer but before the exchange of contracts has taken place. This vulnerability arises because, until the contracts are exchanged, the agreement is not legally binding. Sometimes, another offer is just more attractive to the seller, but it can also happen if delays occur, such as with surveys or mortgages, this can leave the seller wanting to complete quicker and accept another offer from another buyer.
Although it is not necessarily morally right, gazumping is legal in England and Wales. Until the contracts are exchanged, either party – buyer or seller – can withdraw from the transaction without legal consequences. Having said that, once mortgage fees and surveys have been paid for, gazumping can result in this money being lost.
Whether or not to gazump often comes down to a moral decision. Gazumping, while legal, is often frowned upon due to the stress and disappointment it can cause to the original buyer and some people don’t feel comfortable causing this.
Estate agents have a duty to act in the best interests of their clients, which is usually the seller, it is the seller who is paying them. Estate agents are legally obliged to present all offers to the seller and, while they are unlikely to actively support gazumping in every circumstance, if you are also a more attractive or serious buyer than the current buyer or if there are ongoing issues with the current buyer, they may also inform the seller of these benefits.
Estate agents can implement certain measures to minimize the risk of gazumping, such as ensuring there is transparency in communications and that the process runs as quickly as possible toward the exchange of contracts. However, they cannot provide absolute protection against gazumping. Estate Agents are legally obliged to present all offers to the seller, but they also have a role in supporting, so the stronger relationship you have fostered with the agent as a buyer, the more likely they are to actively support you.
To reduce the risk of gazumping, once you have had an offer accepted on a property, provide the estate agents with the details of your solicitor and ask them to take the property off the market to ensure no further viewings can take place. Then work towards exchanging contracts as quickly as possible. Maintain open communication with the seller and their agent, and consider requesting exclusivity agreements or lockout agreements to secure the deal. Home buyer protection insurance can mean you can reclaim some costs if the sale falls through because the seller changes his mind or accepts another offer.
If you find yourself gazumped, stay calm and explore your options. Communicate openly with the seller and estate agent to understand the reasons behind the decision. Review your finances and work out if you can and are prepared to raise your own offer. Don’t be scared to sell your strengths to the estate agents or seller, which may make them reconsider their decision. If all else fails, consider negotiating or seek legal advice to explore potential actions.
While gazumping can not often be avoided, understanding the risks, rights, and responsibilities associated with it is crucial for both buyers and sellers. Open communication and swift progress toward legally binding contracts can help mitigate the impact of gazumping, ensuring a more secure and transparent property buying process.
From mortgages and insurance to viewings, offers, exchange and completion, our Buyers’ Guide will take you through everything, step by step, from start to finish.
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