Buying a home, whether it’s your first property or you’ve done it many times, is always stressful. You hope that after a few purchases you’re more prepared for the unforeseen, like gazumping. In this blog article, we look at how homebuyers get caught out with gazumping and how it can be avoided.
No two home purchases are the same. Even if the homes are identical the process won’t be exactly the same unless they are purchased at the same time. So much can affect the property buying process so, unfortunately, you’ll be kept on your toes and see your stress levels rise throughout the task until a property is legally yours.
TV Reality Shows
With digital TV and reality programs like the UK’s ‘Location, Location‘, homebuyers are more prepared for the property search and offer process, yet buying a home is still the most stressful task we’re likely to experience due to how long it takes and the unknown, like gazumping.
The real estate TV shows, only go so far to prepare us of the potential threats to the property purchase process. TV shows avoid going into too much detail on how to prepare to avoid sellers agreeing to a verbal offer, only to then do what most of us consider unethical, i.e. accept a subsequent offer from another buyer later on.
What is Gazumping?
Has it happened to you? Reality TV programs like ‘Location, Location‘, are not there to present a bad story, and scare us away from property purchases. Many of their clients’ verbal offers are later gazumped but you’re not likely to get any real detail on why it happened and how it could have been avoided.
Caveat Emptor: the property is not yours with the seller’s acceptance of your verbal offer. The seller is within his or her right to accept another offer or come back to you with a higher price. The property is not legally the purchaser’s until the paperwork is signed by both parties, i.e. the buyer and the seller aka vendor.
Why do we believe the deal is done with verbal acceptance? Well, from an early age we’re taught to believe everyone has the integrity to act on their words, hence the popularity of the idiom: ‘my word is my bond‘. It is not until we’re older do we realise not everyone lives by the same etiquette.
Gazumping is actually legal even if your verbal offer was accepted and the seller agrees to the conditions they can get out of it. When this happens to you it not only cheats you out of a house purchase, but it can also waste a lot of money in terms of fees for the building inspection, conveyancing and so on.
When it comes to large sums of money, integrity is often forsaken for financial gain and the seller’s conscious is clear due to the legality of the action of gazumping.
There are some great ways to put yourself in the best possible position to get the property you desire. To help you out, we’ve put together some tips on how you can avoid being gazumped.
- Ask the seller to take the property off the market once you’ve reached a deal so that the chance of being gazumped lowers.
- Insure yourself from gazumping by taking out home buyer protection insurance so that, if someone does gazump you, you can at least claim back some of the costs involved.
- Move through the buying process quickly so that you can finalize the deal and avoid being gazumped in the first place.
- Get comfortable with the seller so that they’re less likely to accept another offer after having helped you and seen how chuffed you are to have your offer accepted.
- Watch out for estate agent tricks; some of them will let you know that there’s been a higher off, putting fear into you about the possibility of being gazumped.
Most deals are done with emotion, therefore, the starting point is to seek to understand who the seller is, and let them understand your motivations for wanting their property. The same strategy can also work with the listing agent too so you can avoid their tricks. Remember listing agents are paid a commission based on the sale price so they are motivated to achieve the highest price at all cost.
It’s not easy to deal with the prospect of being gazumped, but you can put in place mechanisms to protect your interests including the possibility of making an even higher counteroffer if you’re financially able to.
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