What Is Gazumping? And How you can Stop it from Happening to You
Gazumping
I hear you ask… What is gazumping? And how you can stop it from happening to you. If you’re buying or selling a house or flat then gazumping is something that could happen to you. I am going to explain a little bit more about what gazumping is and things you can do to try and stop it happening to you. Firstly…
What does it mean?
Gazump originates from a Yiddish word – gazumph – meaning to cheat.
Therefore, gazumping means to cheat. In property, it is cheating someone else out of a property. Let me explain a bit more about what is gazumping? And how you can stop it from happening to you…
What is gazumping?
Basically, this is when a seller has accepted an offer on a house or flat from a buyer. However, another buyer comes along and makes another offer. This offer is usually higher, and then the seller accepts.
This leads to the original buyer losing the house they wanted and the gazumper buys it instead.
Why does it happen?
This can affect both the seller and the buyer. How? Well, the original buyer loses the house they were planning on buying and has to start their house search again. The seller has to start the whole selling process again but with a different buyer. Crazy really, but in my opinion, it kind of comes down to greed.
If someone is offered more money, they take it. Unfair, but, it happens.
The most likely time it happens is property market is booming. It all comes down to supply and demand. Basically, when there are more buyers than properties for sale.
The longer it takes for the sale to go through the greater the risk a buyer will be gazumped. If there is a chain and then a cash buyer comes along. I guess it can be appealing to sell to someone else.
You may be wondering, what’s the problem?
What’s that saying? All is fair in love and war! I guess, you could be forgiven for thinking that here.
We all know house buying and selling is one of THE most stressful things to do. So, it can be really upsetting and stressful.
Imagine finding your DREAM house. You think it is yours, you are just waiting for a date and then bam! We have sold to someone else, sorry!
Now, this can actually be a problem for sellers as well. Why? Well because gazumpers can be game players. They may actually be offering more than they can afford to pay. Even more scary, they may be offering more than a house is worth, therefore they may not be able to raise the funds for the purchase.
This leads to a risk that the sale will fall through!
Let’s not forget time and money might have already have been spent on surveys, mortgage application fees and solicitors’ fees. It can be costly for all parties.
This cannot be legal though, surely?
Well, it is not illegal. Immoral, in my opinion, but not illegal. Buyers can gazump and sellers can accept the offer. Unfair, yes. It has happened to me before. That is why I want to bring some points to your attention, in order to make sure it doesn’t happen to you.
Until the house is sold only a verbal agreement between buyer and seller. This is not legally binding. It is not law until the contract of sale is exchanged legally. This is in England and Wales, anyway. The laws in Scotland are different. But that is another topic.
How to Stop Gazumping if you are Buying
Firstly, make a strong offer! We all want a bargain, but the better your offer price the less chance somebody will be willing to beat it. Plus the seller will be less tempted to look at another offer. Put yourself in the best position you can.
It doesn’t hurt to ask for the property to be taken off the market as soon as your offer is accepted.
It is good to build a relationship with the estate agents. You can ask them to remove the property and not to conduct any more viewings. You could even say it is a condition of your offer. It is worth a try, to put yourself in the BEST position!
You could also ask for the seller negotiate back with you, if there are any other potential buyers. However, this could potentially lead to a bidding war. So just be careful here. It’s best to take legal advice about the pros and cons of doing this.
Make it easy for the seller
Of course, if you could make yourself a cash buyer. This would put you in an amazing position.
If you have a property to sell, sell it before you find somewhere to buy. Sellers are more likely to see a cash buyer as a priority buyer.
Make sure you have your finances in order. For example, a mortgage in principle. This makes the seller know you are serious. Don’t forget sellers want to sell with ease, as much as you want to buy with ease. Make it easy for them likely to stick with your offer if you have the money waiting.
Be sure you have a solicitor or conveyancer in place and ready to act quickly. Make sure you choose one who has a reputation for carrying out conveyancing as quickly as possible.
The quicker contracts are exchanged the less chance there is you will be gazumped. Sometimes, gazumping may occur not because another buyer makes a higher offer but because the seller needs a faster sale and so decides to accept a different offer having initially accepted yours.
Try to get everyone in the process to agree to a target date for exchange of contracts and for legal completion and to work towards it.
Keep in touch
Keep in regular contact with the estate agent, solicitor, bank or building society and sort out any hitches as quickly as possible. If you can, stay in touch with the seller too if you can.
It is all about building relationships .
Insurance
It is possible to get an insurance policy, often called Home Buyers Protection Insurance. This can to help minimise the problems gazumping can cause. Although, insurance can’t stop gazumping it may refund your expenses if you are gazumped.
Don’t estate agents make sure gazumping doesn’t happen?
You would think so wouldn’t you?
Estate agents who charge a commission to sell a house stand to gain if they find a gazumper who is willing to pay more than has already been agreed. However, most estate agents will say they do not encourage gazumping.
It is known that some have an anti-gazumping policy.
This being said, estate agents cannot stop gazumping even if they wanted to. This is because if, after a sale has been agreed, another offer comes along. They are duty bound to pass it on to the seller.
So, whether they like it or not, an estate agent may actually be involved in gazumping. I know it sounds harsh. This is why as a buyer you have to do everything you can to understand; what is gazumping? And how you can stop it from happening to you.
Buying a house for investment?
If you are not purchasing your new family home. It could be worth considering alternative ways to invest your money. If you have money to invest you want it to work for you don’t you? You want it to bring a return on your investment, don’t you?
I am thinking the least hassle would be nice too.
What can you do?
To be honest, there are so many options available to you. So, please do not worry!
What we do is work with our investors, so that you have the confidence to know your money is working for you.
You will not be getting negative rates, put it that way!
If you want to have a conversation on how we may be able to help please just get in touch here.
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So, What is gazumping? And how you can stop it from happening to you. I hope I have explained a bit more to you.
We will keep bringing you up to date information about Sheffield, I Squared Properties and what we are up to and new developments we are taking on.
Speak soon
Laura and James