Gazumping happens when a seller accepts a different offer on their property after agreeing to another offer from another buyer. It’s important to remember that a sale isn’t legally binding until contacts have been exchanged. Either side is free to walk away from the deal until this point, and in most cases it takes around 3 months to be in a position to exchange contracts. Gazumping doesn’t necessarily mean excepting a higher offer than the one agreed - the motives of the seller can vary. For example, they could receive a slightly lower offer from a buyer that is in a stronger position (e.g. a cash buyer) that they could give as lower risk. As a buyer, if the vendor of the property you are buying decides to accept another offer, you may be liable for legal fees to cover the work already undertaken, and any surveyors you have paid for also would be lost. Without prior written agreement, there unfortunately is nothing you can do about the lost money.
Gazundering happens when a buyer reduces their offer amount, potentially putting the vendor of the property into a difficult position and having to consider the lower amount if they have no other buyers waiting. An example situation is for a buyer to wait until the very last stages of the transaction before making their lower offer. If there is a chain involved in the sale, this can almost force the seller into accepting the lower offer or have to start the process of finding a buyer all over again. Gazumping is more common in a ‘sellers market’, where house prices are rising. On the other hand, gazumping tends to occur when prices are in decline - a ‘buyers market’.
What can you do to avoid it?
Gazundering can be very difficult to avoid if you don’t have another buyer that you are able to fall back on. If you are hit with a lower offer, make sure you understand the buyers reasons and ask if they can back up any concerns - for example, is it something in relation to an issue raised on the survey or is it simply that they’re having second thoughts about the price? Try making a counter offer if you feel able to, this can help cover some of the difference. However, it is sometimes worth holding out and calling the buyer’s bluff. It’s a very difficult situation, so make sure you ask the advice of your agent at every stage. They deal with buyers on a daily basis and will have dealt with gazundering before.
As a buyer, you can reduce the risk of gazumping by asking the seller to take the property off the market once they’ve accepted your offer, building a good relationship with them and, of course, working to get to the exchange of contracts as soon as possible. It may also be worth checking whether your seller's agent has a policy on gazumping, meaning they require the seller to turn down any offers made after the initial acceptance.
As a buyer, the risk of gazumping can be reduced by doing the following:
Asking the seller to take the property off the market as soon as they’ve accepted your offer.
Make sure you provide proof of your funds and solicitors details as quickly as possible
Complete all legal paperwork as quickly as possible to help your solicitor to move to an exchange of contacts
Work with the estate agent selling the property and make sure they are communicating with the seller so they know that you’re doing what you can to move things forward.
If gazumping and gazundering are real concerns for your sale, you could get your solicitor to draw up an agreement between both parties. This might prove expensive, but it might be worth it to avoid the headaches associated with either gazumping or gazundering.
If you have further questions about anything in this article or want to speak to a solicitor, please call our office on 0116 456 0131.