AS A BUYER, getting your offer accepted for a new home is often a time for champagne-popping and jubilation. But be warned not to celebrate too soon as even at the very last minute, everything could fall through if you end up being gazumped.
So… What the hell is Gazumping?
Gazumping is where after the seller has accepted an offer made by a prospective buyer on a property, they cancel the deal before the exchange of a contract and end up selling to another buyer with a better offer. This practice has been on the rise especially in the UK in response to increased house prices and competition for property.
While most may consider this behaviour unethical, it is not illegal under UK laws. It leaves the prospective buyer disappointed and devastated, with their only hope being to increase their price in a bid to beat the counteroffer.
How to avoid being gazumped
While there is no guarantee that the purchase of your dream house will go through, below are some ways to reduce your chances of being gazumped:
Make your offer realistic
If you really like the house you want to buy, make the seller an offer that other buyers will be unable – or unwilling – to beat. By making an offer that matches the value of the property, you will also increase the chances that the seller will be willing to take the property off the market. Even in the instance that a delay occurs on your end, the seller would show more patience if the offer is good.
A well-organized buyer simply gives sellers fewer reasons to backtrack on a deal. The first step towards organization is ensuring that your finances are in place. Being a cash buyer will give you a significant advantage in highly competitive markets. If buying cash is not an option for you, having a mortgage agreed in principle before you start searching will prevent delays later on. Such delays are the main reason sellers continue to search for buyers.
You should also carefully choose a solicitor who will be active and act quickly on your instructions beforehand. All the legal paperwork and documents should also be in order before you start the search. If you want to sell your old house first, ensure you have a buyer in hand before you make your offer. Being organized will eliminate delays in the process which might tempt the seller to let other buyers in.
To keep the sale moving along swiftly, complete required paperwork accurately and quickly and maintain constant communication with your solicitor so that you can know and resolve any hold-ups when they occur. By applying the necessary pressure, the seller will see that you are serious and they will be unlikely to search for other buyers.
Ensure the Property is Removed from the Market
Once your offer has been accepted, it is only reasonable that the seller takes the property off the market. This includes removing it from estate agent websites and windows and the removal of the “For Sale” sign if one was present. While some sellers would prefer the keep the property on the market as insurance for if the buyer decides to pull out at the last minute, refusal to remove it from the market should be taken as a sign that they are on the lookout for better deals. If you make a written request and the seller refuses to take it down, it would be safe to back off or proceed carefully bearing in mind the high likelihood of being gazumped.
Get Close to Your Seller
After living in a house for only a few months, it is common for one to become attached. When looking for a buyer, house owners may want to feel that their old home will be taken care of and treated with respect. To give them this kind of assurance or confidence, it is important to keep in contact with them and build a relationship. Such a relationship will prevent them from considering other offers that may come their way.
Take a lock-out agreement
A lock-out agreement prevents the seller from seeking or accepting offers from prospective buyers for a certain time period. If the seller agrees to sign such an agreement, then you will be certain that no one will gazump you before the agreed period expires. Many sellers may be reluctant to sign such an agreement and a deposit could come in as a handy motivation. You solicitor should be consulted when drafting such an agreement as they could get complex in some cases.
The above tips will reduce your chances of being gazumped but you can never be too certain. Once you have identified the house you want to purchase, move as quickly as possible and close the deal with a contract before you can pop that celebratory bottle of champagne.
Good luck getting your dream home.