18 November How to avoid being gazumped
There are few feelings more gut-wrenching and few experiences are more expensive than having the property you were about to exchange on suddenly be pulled from under you. When a seller decides to accept an eleventh hour offer from a new party.
Gazumping might be less common in this day and age, but it still happens.
Latest figures produced by Emoov suggest that it has fallen by around 11% in the past year, but it is still reported to be happening to around one in four buyers. Which has again reduced since 2017 but still remains a troublingly high figure.
While its reduction is good news for buyers, the fact that it remains at around a 25% chance of happening to them, is an ever-present danger to the buying process. So how can you stop it from happening to you?
Where does it happen most often?
London is by far the worst offender for gazumping with an average of 66% of buyers experiencing the last-minute loss in the past year. This figure is up 35% from 2017, which would suggest the problem is becoming worse in London as it improves across the rest of the country.
As anyone who has experienced gazumping can testify, it is a horrible experience. Especially when you’ve set your heart on a dream home, only to have it snatched away from you when you believed the deal was done.
In most cases, unless you can come up with the money to make a higher counteroffer, you’ve lost the property and, worse, all the time, cost and effort to that point has been wasted. You’re left with no choice but to go back and start searching for a new property all over again.
The practice of gazumping isn’t illegal.
Under English Law the agreement between you and the buyer hasn’t become legally binding until contracts have been exchanged.
How to reduce your risk
The government is looking at introducing measures to reduce the number of buyers who fall victim to gazumping. The plans are to introduce what is known as a voluntary reservation agreement. This would formulate an agreement after the offer acceptance stage that would in essence lock the seller into the agreement with the buyer.
In the meantime, here are some things you can do to help you avoid it:
The more organised you are, the quicker you can move. If you’ve got a lender you can have a mortgage agreement in principle with then you’re already ahead of the game. Have your solicitor selected and appointed too and make sure they’re one who is available and proactive. Make sure you’ve got all your documentation ready to go, ID, AML docs and so on.
Keep in regular contact with your solicitor and estate agent, return forms and documents quickly and keep the process moving.
If possible, get a firm offer on your own property before you make the offer on the one you want. Anything you can do to reduce the time between offer acceptance and agreement of sale the less chance there is that the deal will fall through.
- Get the property taken off the market
Once the offer has been accepted, ask the seller to take the property off the market. Make sure this is in writing so it’s legally binding too. Ask the estate agent to remove the signs from outside the property too, this reduces the chances of another person seeing them and trying to hijack the sale.
Though the seller and the agent are not obligated to do these things, you should question why they wouldn’t if they refuse.
- Get friendly with the sellers
There are no guarantees of course, but if you take the time to get to know the sellers, talk to them, learn about them and let them learn that you’re a genuine buyer with your heart set on their property, they’ll be less inclined to just drop you if they get a better offer.
- Consider a lock-out agreement
A lock out agreement or exclusivity agreement is one where the vendor agrees not to seek or accept other offers for a given period of time. Of course, getting them to sign it is another matter entirely and it could be a complex and expensive agreement for your solicitor to draw up. Depending on the value of the property to you, this may or may not be a worthwhile exercise.
- Take out specialist insurance
You can of course take out home buyers protection insurance. This will usually cover you for loss of upfront expenses you may have made in good faith on the expectation of a property purchase (such as legal, surveyors, mortgage fees etc).
For more information or to talk with us further about your property buying or selling aims please get in touch with Walton Estates today.