Over a third of property purchases secured by ‘gazumping’ another buyer’s offer

The leading reason for property sales falling through is gazumping, according to new research from comparethemarket.com.

Over the past year, nearly two-fifths (39%) of buyers admitted they had successfully secured their home by outbidding another offer that had already been accepted- also known as gazumping.

This is when another party makes a higher offer on the house you are in the process of buying and has that offer accepted, thus pushing you out of the purchase, setting you back to square one and back on the search for the perfect home.

For those being ‘gazumped’ at the last minute, the experience can be heartbreaking and the figures suggest it’s becoming more common.

Of those that tried to buy in the last year, but had their purchase fall through, gazumping is to blame for 38% of failed transactions.

Despite its sneaky nature, t’s thought that three-quarters (75%) of prospective house-buyers would consider gazumping if their dream home was already under offer with another buyer.

The prospect of being gazumped is adding to stress for many homebuyers.

Over three-quarters (81%) of those who are waiting for their house purchase to complete, expressed concern that another potential buyer might come in and use the method of gazumping.

During the past year, 38% of house-buyers paid above the asking price of the property in order to secure the deal, paying more than £16,000 on average.

Gazumping is currently legal in UK as the ‘agreement of purchase’ only becomes legally binding once contracts have been exchanged.

If a buyer is gazumped after their initial offer had already been accepted, they may also lose out on fees already paid on surveys, solicitors, and obtaining a mortgage for the property.

This has created concern in the market, and comparethemarket.com’s research reveals that more than two-thirds (68%) of people who have bought or tried to buy a house in the last year or are looking to, would support a law that made gazumping illegal, or ensured better protections are in place to prevent this happening.

Mark Gordon, director of mortgages, comparethemarket.com, said: “The race to meet the first stamp duty deadline on 30 ^th June has led to an increase in demand for homes, meaning many buyers are willing to pay above the odds and even gazump homes which are already under offer.

“This has left many prospective buyers significantly out of pocket and adds additional stress to the home buying process, given the average sale takes about three months to formally exchange contracts.

“Whether you are a first-time buyer or moving home, prospective homebuyers should be as prepared as possible before making an offer to ensure that the process runs smoothly and quickly.

“It’s important to make sure you shop around online to compare mortgage rates and have all your finances lined up before putting in an offer.”

What can you do to avoid being gazumped?

Property website Home Owners Alliance have put together a list of ways you can avoid the disappointment of ‘gazumping’.

Get insured

If another buyer comes in with a much higher offer than you, there’s very little you can do to stop the seller from accepting it.

But you can insure yourself against this happening by taking out home buyer protection insurance.

If the sale falls through because the seller changes his mind or accepts another offer, you’ll be able to claim back some of your conveyancing fees, survey fees and any other costs you may have had to pay out.

Be prepared

Before you make an offer on any house, make sure you have a mortgage agreement in principle in place, a solicitor lined up and all of the necessary documentation to hand.

These are the types of things that can cause unnecessary delays if you’re unprepared.

Move quickly

It is also helpful to move the process along as quickly as possible and once contracts are exchanged, the agreement is legally binding, so you want to get to that point as quickly as possible.

Keep in contact with your mortgage broker and conveyancing solicitor to keep the pressure on and ensure your case doesn’t fall by the wayside, and respond quickly to requests for information.

Ask for the property to be taken off the market

Sellers are not always keen to do this but it’s worth asking. If the property is no longer being advertised, there’s much less chance of a higher offer being made and you being gazumped.

You’ll have more luck if you offer something in exchange to show your commitment e.g. a survey undertaken as soon as possible after the offer has been accepted.

Get to know the sellers

If you get along with the seller and they can see you’re a serious buyer who genuinely loves their property, there’s much less chance of them ditching you for a better offer.

Keep them informed with where you’re up to in the process so they can see that you’re actively trying to move things along.

Agents and solicitors tend to want to avoid having clients contacting each other but there’s nothing to stop you from sending a thank you card or exchanging email addresses to keep in touch.

Consider a “ lockout agreement”

A lockout agreement is essentially a contract between the seller and the buyer stating that the buyer has the exclusive right to buy the property within a certain period of time.

Of course, the seller has to be willing to sign this but it may help to prove to them that you’re serious about wanting the property and will appeal to sellers that have had a sale fall through before or want to move fast.

Speak to your conveyancing solicitor about what would be involved and the cost of drawing up the agreement.

Beware of estate agent tricks

Some unscrupulous agents (not all, just a few rotten eggs) may invent a higher offer at the last minute so that you feel forced to increase your offer to avoid being gazumped.

If the agent comes to you with news of a better offer, ask to see proof of the offer in writing.

If it is a genuine offer, don’t immediately panic and increase yours.

It’s important to know at the start of your property search what your maximum price is and stick to this, even if the agent is trying to whip you into a frenzy.

What to do if you are gazumped

If you’ve done everything you can to avoid getting gazumped and still hear that a higher offer has been made, then review your finances and consider whether you can gazump your gazumper with a higher counteroffer.

But be careful not to over-stretch yourself financially in the heat of the situation. And beware, you could be gazumped again.

If that isn’t an option, there’s only one thing left to do – sell yourself. Highlight absolutely everything that works in your favour, whether it’s that you’re a first-time buyer with no chain to the fact you’re utterly flexible on moving dates.

Write to, email or phone the seller to explain how much you love the property, want to make it a family home, or whatever you think appeals most to your vendor.

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