Jargon Buster: gazumping
“The gazump” may sound like an evil character in a Dr Seuss book, but it is actually a bit of jargon thrown around by property pundits.
What does gazumping mean? Well, we’ll tell you….
A: In England and Wales a buyer’s offer is not legally binding even after acceptance of the offer by the seller, which means that a seller is within their rights to accept another higher offer even after the sales process has been begun by the first buyer – this practice is known as ‘gazumping’.
When the seller of a property accepts an offer on a property, the buyer will then arrange for a survey and will instruct their conveyancing solicitor. The offer to purchase is made “subject to contract” and thus, until written contracts are exchanged either party can pull out at any time. It can take as long as 10-12 weeks for the exchange of contracts to be completed. If the seller is tempted by a higher offer during this period, it leaves the buyer not only disappointed but causes them to lose the money that they have spent on their survey and solicitor.
So why don’t estate agents stop gazumping?
If you are not familiar with the law, it may seem like estate agents are the enemy in this case. However, estate agents are contractually obliged to put up any offer to the seller and it is then the seller’s decision whether or not to accept the second offer and therefore ‘gazump’ the first buyer.
In some cases, such as when a corporation is selling a property, estate agents are required to not only continue to show the property to prospective buyers but to also to publish a public notice publishing the offer price and inviting higher offers. In cases like these where a corporation is selling property, there are bargains to be had, but gazumping is a greater risk.
When the property market is very buoyant, gazumping is common. When the property market is slower, the practice of gazumping becomes rare.
What is gazundering?
The term gazundering has been coined for the opposite practice whereby the buyer waits until everybody is poised to exchange contracts before lowering the offer on the property, threatening the collapse of a whole chain of house sales waiting for the deal to go through.
What can you do to protect yourself from gazumping (or gazundering)?
When you put up your offer, ask if it is possible for the property to be taken off the market once the survey is booked. Be aware that if you are buying a property that is being sold by a corporate client they will actively look for higher offers and you will simply have to take the risk of being gazumped. A great solicitor and estate agent will also help protect your interests.