At Blackstone Solicitors, serving clients across England and Wales, we understand that buying a property can be a stressful experience. One of the most frustrating situations a buyer can face is gazumping. This article aims to clarify what gazumping is, explain why it happens, and provide practical tips on how to minimise the risk.
Gazumping, in essence, is when a seller accepts an offer from a buyer, but then accepts a higher offer from another buyer before contracts are exchanged. This practice, while legal in England and Wales, can be incredibly disheartening for buyers who have invested time and money in the process.
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Understanding Gazumping:
Gazumping occurs because, until the exchange of contracts, neither party is legally bound to the transaction. This leaves the seller free to accept a better offer, even if they have verbally agreed to a sale with another buyer. This lack of legal commitment during the early stages of the property purchase process is the root cause of gazumping.
Why Does Gazumping Happen?
Several factors contribute to gazumping:
- Rising Property Prices: In a rapidly appreciating market, sellers may be tempted to accept higher offers as property values increase.
- Greed: Some sellers may simply prioritise maximising their profit, regardless of the impact on the original buyer.
- Lack of Commitment: Until contracts are exchanged, there is no legal obligation to proceed with the original buyer.
- Slow Conveyancing Process: Delays in the conveyancing process can create opportunities for other buyers to make higher offers.
- Competitive Market: In a highly competitive market, buyers may be willing to offer significantly more to secure a property.
How to Minimise the Risk of Gazumping:
While it’s impossible to eliminate the risk entirely, there are several steps you can take to minimise the chances of being gazumped:
- Move Quickly:
– Promptly instruct your solicitor and mortgage broker.
– Arrange for surveys and valuations as quickly as possible.
– Respond promptly to any requests for information or documentation.
- Request the Property be Taken Off the Market:
– Ask the seller to take the property off the market once your offer has been accepted.
– While this is not legally binding, it demonstrates the seller’s commitment.
- Agree on a Lock-Out Agreement:
– A lock-out agreement, also known as an exclusivity agreement, is a legal contract that prevents the seller from accepting offers from other buyers for a specified period.
– This provides legal protection and gives you time to complete the conveyancing process.
- Exchange Contracts as Quickly as Possible:
– The quickest way to avoid gazumping is to exchange contracts as soon as possible.
– This creates a legally binding agreement and secures the purchase.
- Build a Good Relationship with the Seller:
– Maintaining open and friendly communication with the seller can help build trust and reduce the likelihood of gazumping.
– Demonstrating your commitment and enthusiasm can also be beneficial.
- Obtain Mortgage Approval in Principle:
– Having a mortgage approval in principle demonstrates your financial readiness and can reassure the seller.
- Be Prepared to Act Decisively:
– If you suspect you are at risk of being gazumped, be prepared to act decisively.
– This may involve increasing your offer or seeking legal advice.
- Use a Reputable Estate Agent:
– A reputable estate agent will act professionally and ethically, reducing the risk of gazumping.
– They will also be able to advise you on the local market conditions.
- Keep Communication Open with your Solicitor:
– Your solicitor is a vital asset in the conveyancing process. Regular communication means they can keep you up to date, and advise you quickly if problems arise.
- Consider Insurance:
– Some insurance policies offer protection against gazumping, covering some of the costs incurred if the sale falls through. Check what is covered, as these policies vary.
Legal Considerations:
It’s important to remember that, until contracts are exchanged, the seller is legally entitled to accept a higher offer. While gazumping is frustrating, it is not illegal. However, if the seller has made misleading statements or breached a lock-out agreement, you may have legal recourse.
Conclusion:
Gazumping can be a frustrating and costly experience for buyers. By taking proactive measures, such as moving quickly, building a good relationship with the seller, and considering a lock-out agreement, you can minimise the risk.
At Blackstone Solicitors, we understand the challenges of the property market, and we are committed to providing expert legal advice and support to help you navigate the conveyancing process. We can help you to move quickly, and efficiently, to reduce the risk of gazumping.
How we can help
We have a proven track-record of helping clients purchase a new home. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Residential Property Solicitors
It is important for you to be well informed about the issues and possible implications of buying a residential property. However, expert legal support is crucial in terms of ensuring a positive outcome to your purchase.
To speak to a member of our New Enquiries Team today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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