Heavy Rain Shower
Added on: 27th September, 2017 by Nicola_20987
According to the government, 200,000 property transactions collapse each year due to the unsavoury practice of gazumping, and the cost of failed transactions could amount to £270 million each year.
Mr Steve Taylor residential property lawyer at Malcolm C Foy in Doncaster and Rotherham examines the risks of gazumping and advises what you can do to protect yourself if you are buying a house.
What is gazumping and why does it happen?
Gazumping occurs when a seller formally accepts a buyer’s offer but then accepts a higher offer from another buyer.
It is most common in a buoyant property market, where prices are rising and there are more buyers than available homes. In some property hot spots, agents have even reported cases of ghost gazumping. Sellers withdraw from an agreed sale simply to remarket their property, hoping to elicit higher offers.
People often blame the legal system in England and Wales for allowing gazumping. Before exchange of contracts, there is no binding legal agreement in place. Until then, either party may withdraw from the transaction without giving any reason.
What should you do if you are gazumped?
Losing your dream home can be a huge disappointment. You may have already paid for a survey, mortgage application and some legal fees. You can ask the seller to contribute towards these costs. However, legally, there is generally no obligation on him to do so.
Often the seller will ask you to match, or better, a higher offer. However, think hard before agreeing to this. You may end up paying more than the property is worth or more than you can really afford. Remember, too, the seller could easily change his mind again.
Fortunately, there are some ways to reduce the risk of gazumping.
Ask the seller to take the property off the market
The estate agent must pass on any offers he receives to the seller, even after your offer has been accepted.
Taking the property off the market should substantially reduce the risk of further offers coming in. Check also that the agent has removed any ‘For sale’ signs and updated any property listings in order to show that the property is sold subject to contract.
Consider a separate legal agreement regulating the period before exchange
A lock-out or exclusivity agreement can prevent the seller from accepting any competing offer on the property for a defined period. Another possibility is a costs guarantee, in which each party agrees to pay the other’s costs if they withdraw first.
If you are worried about being gazumped, discuss the options with your conveyancer. Any agreement must also be acceptable to the seller, who may be concerned about his position if you should fail to progress matters.
Home buyer’s insurance
A home buyer’s insurance policy will not prevent gazumping. However, it may compensate you for wasted expenses. Your conveyancer can advise you on the cost of a policy, and its limitations.
On average, it takes eight weeks from having an offer formally accepted until the exchange of contracts. During this period either party may change their mind. Where possible, therefore, it makes sense to reduce this length of time.
Eliminate potential sources of delay. Arrange your finances and any survey well in advance. Instruct your conveyancer early on and reply promptly to any questions raised or requests for funds to be transferred.
Stay in regular contact with both the seller and the estate agent. Maintaining a good relationship with the seller may make him less likely to accept another buyer’s offer.
Remember, too, that an unexpected delay or a protracted silence may lead the seller to doubt your intention to proceed.
Find a good conveyancer
Choose an experienced, proactive conveyancer who will give your purchase their close personal attention. They will help to keep your purchase on track. They will also explain to the seller’s representatives the reason for any delay and reassure them that you are both working hard to resolve matters.
Communicating your commitment can be your best defence against gazumping.
If you have any questions about the conveyancing process or are buying or selling a house, contact Mr Steve Taylor conveyancing solicitor/lawyer in our residential property team.
Mr Steve Taylor
T: 01302 340005
F: 01302 322283
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.04.10.16