Gazumping can be cruel and expensive for the buyer who has been let down at the 11th hour, but unfortunately, it is not illegal. However, there are some steps you can take to avoid being gazumped.
If you are thinking of buying a home, you may have heard of the term 'gazumping' and being told to beware of being 'gazumped'.
Gazumping is the term used to describe when another buyer snatches the property from you at the last minute by offering the seller a higher offer.
Normally, something like this should not happen when you've already had your offer accepted and paid all your mortgage arrangement fees, surveying costs and conveyancing fees. But unfortunately it can happen, and could leave you out of pocket, especially if you have already reached such a late stage of the home buying process.
In some cases, buyers have already sold their home and have found themselves gazumped on their new home and have nowhere to live.
Sadly, there are no laws to prevent gazumping. And the seller can accept an offer from another buyer for any reason — it doesn't have to be just for a higher offer. In some cases, the seller could even claim there is a higher offer at the last minute in an attempt to get you to up your offer.
If there are delays with the conveyancer or your mortgage application is taking time, the seller could also decide to take an offer from another buyer.
The issue of gazumping is more prevalent in England and Wales, but is actually less common in Scotland. This is because the home buying process is often administered by solicitors (rather than non-solicitor estate agents, as is more common in England and Wales) who have signed up to a law society code, which prohibits accepting an offer from another buyer once an offer has been accepted. The law still does not prevent the seller to accept an offer from another buyer, but due to the complexity of going around the solicitor, the seller is likely to do so.
The key to avoid being gazumped is to get everything you need to complete the home purchase quickly. The more delays there are the more opportunity there is for the seller to consider other offers.
For example, you should try to get a survey, which takes time, arranged before you make the formal offer. You should also get a mortgage in principle before you make the offer. A mortgage in principle is an agreement that the lender, in theory, based on a basic check of your finances and suitability, would be happy to lend to you. The mortgage in principle also shows the amount that they would be happy to lend to you, which would reassure the seller that your offer is serious.
However, a mortgage in principle is no guarantee — you will still need to do further checks and provide more details before you can get fully approved for a mortgage.
Although a conveyancing solicitor will help you arrange the payment to the seller, it might be worth finding one in advance of putting in the offer. Finding a conveyancing solicitor you'd be happy to work with will again speed up the process.
Try to arrange the following in advance of putting in an offer:
Mortgage in principle
You should also ask the seller to take down the listing once you've made the offer. It would not be unreasonable to request that the seller and estate agent stop continuing to advertise the property, but they may claim they want to reduce the risk in case your offer falls through.
If you want to go a step further, you could enter into a 'lock in' agreement (sometimes known as a lock out agreement), which is a binding contract preventing the seller from negotiating with anyone else.
It works by getting both parties (buyer and seller) to pay in a deposit, usually around 2% of the home's price, which will be given back to you both once the sale goes through. If, for any reason, the buyer or seller pulls out of the deal (including gazumping) then the wronged party will be paid the deposit from the other person.
However, to get a lock in you will need a solicitor to help arrange this and that might cost you a little extra on top of all of your other legal fees, but it can provide valuable peace of mind.
You could also speak to an insurer about covering your conveyancing, mortgage and survey fees if the deal falls through, but it's unlikely you'll get a good price for this.
If you can do what you can to act as quickly as possible throughout the home buying process, then you should minimise the risks and have a better chance of getting your offer approved without any big issues.
If you've been a victim of gazumping, then there isn't a lot you can do. Gazumping is legal, and if you've done everything you can to minimise the risks, then the only thing left for you to do is to come back to the seller with a higher offer.
You should check with the seller why they took another offer. It might be because the other buyer promised to complete the purchase quicker. In which case, you could offer to sort out everything quicker and maybe with a higher offer.
However, it's worth considering that if the seller has already accepted an offer from another buyer, what would stop them doing it again? You might end up being used to help the seller get a much higher offer, especially if the property is quite popular.
Also, weigh up how much your mortgage lender would be willing to give you, and what your budget can handle.
You should only get a mortgage that suits your budget and financial circumstances. Ideally, you should try to find a property well within your budget, and mortgage range, so that if you do need to up your offer, you can still do it.
With more stringent mortgage affordability checks in place, it will be harder to get approved for a bigger mortgage. If you do get gazumped and you need to increase your offer, you may face a significant delay in trying to get your mortgage approved again, so it's best to have everything in place as early as possible.
Potentially. If you have already arranged your mortgage, you will have likely paid a mortgage arrangement fee. You may have already paid for a house survey and for a solicitor to help facilitate the process.
However, that isn't to say you should avoid doing these things until the last minute. You should always try to sort these out as early as possible to minimise the opportunity for the seller to consider offers from other buyers.
If you've been gazumped, you may have to go back to square one. At the very least you will have a better sense of what to do next time to reduce the chances of being gazumped again.
It's important to be firm with the seller and their estate agent to get a clear timeline for completion and exchange. Sometimes, simple agreements via email can make it harder for the other person to keep stalling.