How Homebuyers Can Protect Against Gazumping

Whether it’s your first property purchase or you are an old hand at it, buying a home is always stressful. On top of the usual challenges, you also have the uncertainty that the house will be yours while contracts have not exchanged. Unfortunately, Gazumping is alive and well, particularly in England, where a seller will accept a better offer even after having agreed to sell their house to you. In this blog article, we look at how homebuyers get caught out with gazumping and how to avoid it.

Expect the unexpected with property sales as no two property purchases are identical. So much can affect the property sales process including the seller changing his mind, so, unfortunately, you’ll be kept on your toes until the property is legally yours.

What is Gazumping?

Have you been gazumped? It happens more than you realise. Reality TV programs like ‘Location, Location‘ have often said their buyer’s offer has been gazumped, but there is no detail on why it happened and how it could have been avoided. We know about gazumping is it can not occur once the sales contract has been signed and exchanged between the two parties (buyer and seller).

Caveat Emptor: what you need to know is the property is not yours with the seller’s acceptance of your verbal offer. The seller is within his or her right to hold off signing your sales contract. Whilst they have your contract, they can 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? From an early age, we believe everyone has the integrity to act on their words, hence the popularity of the idiom: ‘my word is my bond‘. But, unfortunately, it is not until we’re older do we realise not everyone lives by the same etiquette.

Gazumping is legal. Even when your verbal offer is accepted, the seller can get accept another offer. 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 conscience is apparent due to the legality of the action of gazumping.

Avoiding 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 there’s less change of being gazumped.
• 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 know 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. Still, 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.