Gazumping happens when the seller of a property accepts a verbal offer of purchase from a buyer only to then either accept a higher offer from another buyer, or suddenly demand a higher price to that already agreed upon.
Why does Gazumping happen?
Gazumping is most common in the UK property market, less so across the rest of the world. This is because British property and ownership laws require all agreements be confirmed in writing before they are legally binding. This means a seller can ‘accept’ your verbal offer of purchase but, until the paperwork is signed, there is nothing stopping them from changing their mind.
Savvy buyers know this fact and, if they’re particularly keen to purchase a property already under offer, will drive the price up. The potential buyer who made the initial offer is now in a situation where they have to either up their offer or lose out on the purchase.
Gazumping is most common in healthy property markets where house prices are trending upwards. The practice is rare in markets where values are declining because buyers are less willing to pay over the odds.
In fact, there is another word, ‘Gazundering’, which is more common in markets of falling value. Gazundering sees a buyer place an initial offer only to later threaten to withdraw their offer unless a lower price is agreed upon.
How can I avoid being gazumped?
If you’re looking to make a verbal offer on a home, there are a few things you can do to avoid being gazumped.
Be ‘ready to go’
The longer it takes to formally sign the paperwork on your offer, the more time there is for you to be gazumped. So, before you make your verbal offer, try to be as ‘ready to go’ as possible. This means you should get your mortgage pre-approved, and ensure that the sale of your own home is as advanced as possible. If you’re ready to move swiftly, you will be hard to stop. If not, the seller may grow impatient.
Be smart with your offer
Try making an offer which leaves you with enough money left over to re-gazump anyone who tries to gazump you. So, if you have a maximum budget of £200,000, try going in at £190,000. That way, when a ‘gazumper’ offers £195,000, you can still up their offer – you’re still in the game and it’s up to them to further trump you.
While this can help in fending off a gazumping, not many of us have the financial clout to start playing mind games with our money, so don’t make this your only defense against gazumping.
Insist on the home being taken off the market
When you make your verbal offer, one good way of avoiding a gazumping is to insist that your offer only exists on the condition that the home is taken off the market straight away. This means that nobody else can view or make an offer on the property while you are busy hiring a solicitor and commissioning a full survey.
A trustworthy agent
While gazumping is a legal practice in UK property law, it is sometimes frowned upon by industry professionals. It is possible, and a good idea, to find an agent to represent you who does not like the practice and who will work on your behalf to push the sale through as quickly as possible and shrewdly handle any gazumping attempts.
Have you ever been gazumped? How did you handle the situation? Let us know in the comments section below.
If you have a gazumping-related question for our property expert, Russell Quirk, let us know below.
