What is Gazumping?

If you’re buying a house, you may have heard the term “gazumping” and wondered what it means. Here’s everything you need to know about gazumping and how to protect yourself.

What is gazumping?

Gazumping is when someone else makes a higher offer on a house you are in the process of buying, and the seller accepts that offer instead of yours.

This can happen even after your offer has been accepted by the seller. Until you exchange contracts, the seller is free to accept another offer from a different buyer.

Here’s how it typically happens:

1. You make an offer on a house and the seller accepts it
2. You arrange surveys and start the legal process
3. Another buyer makes a higher offer
4. The seller decides to accept the higher offer instead
5. Your purchase falls through

Is gazumping legal?

Unfortunately, yes. Gazumping is perfectly legal in England and Wales.

Until you sign contracts, there’s no legal agreement between you and the seller. They’re free to accept an offer from anyone for their house until the exchange of contracts completes.

This means that even after you have had your offer accepted, you could still be gazumped.

Why does gazumping happen?

Gazumping usually happens for one of these reasons:

• Higher offer: Another buyer offers more money for the property
• Better position: The new buyer is in a stronger position to complete the sale quickly
• Cash buyer: The gazumper can buy without needing a mortgage
• No chain: They don’t need to sell their own property first
• Speed: They can complete the purchase faster than you

Is gazumping common?

Research shows that 37% of UK homebuyers are now being gazumped – that’s more than 1 in 3 buyers. This figure has grown by 6% in the last two years.

Gazumping is more likely to happen when:

• Property prices are rising
• There’s high demand for houses
• The market favours sellers
• There’s a shortage of properties for sale

What about gazumping in Scotland?

Gazumping can happen in Scotland but it’s not very common.

Unlike in England and Wales, Scottish law works differently. Most estate agents in Scotland are also solicitors and are bound by different legal standards.

Scottish law requires the conveyancer to stop gazumping where possible. Once your offer is accepted, they can’t accept an offer on the property from other buyers.

However, the homeowner could still accept a higher offer if they advertise their house with a new estate agent.

How to reduce the risk of being gazumped

You can’t completely avoid gazumping, but you can try to reduce the risk of it happening. Here are some steps that may help:

Before you make an offer

• Get a mortgage agreement in principle – this shows you’re a serious buyer with finance ready
• Arrange a solicitor in advance – have your legal support ready to move quickly
• Get quotes from surveyors – so you can book surveys immediately after your offer is accepted

When you make your offer

• Make a competitive offer – low offers are more likely to be gazumped
• Ask for the property to be taken off the market – request this as a condition of your offer
• Highlight your strengths – mention if you’re chain-free, flexible on dates, or a cash buyer

After your offer is accepted

• Move quickly – arrange surveys and legal work as fast as possible
• Stay in regular contact – keep in touch with your solicitor and estate agent
• Build a relationship – if possible, communicate with the seller about your plans for the property

What is gazundering?

Gazundering is the opposite of gazumping – when a buyer reduces their offer just before contracts are exchanged. Like gazumping, it’s legal but unethical.

What to do if you’re gazumped

If you find out you’ve been gazumped, here are your options:

Consider increasing your offer

• Review your finances to see if you can match or beat the higher offer
• Remember to factor in costs you’ve already spent
• Don’t stretch beyond what you can afford

Highlight your advantages

• Remind the seller why you’re a good buyer
• Emphasize if you’re not in a chain or can move quickly
• Express how much you want the property

Know when to walk away

• Sometimes it’s better to start fresh with a new property
• Consider whether the seller might gazump you again
• Factor in the emotional and financial cost of continuing

Protecting yourself financially

Home buyers insurance

This type of insurance can help cover some of your costs if you get gazumped. It typically covers:

• Survey fees
• Legal costs
• Mortgage application fees

The insurance usually costs between £75-£150 and can be worth it for peace of mind.

Keep track of your costs

Make sure you know how much you’ve spent on:

• Property surveys
• Legal fees
• Mortgage arrangement fees
• Other associated costs

This helps you make informed decisions if you’re gazumped.

Lock-out agreements

A lock-out agreement is a contract between you and the seller where they agree not to consider other offers for a set period (usually 2-4 weeks).

While the seller doesn’t have to agree to this, it can provide some protection against gazumping. You might need to pay a small fee for this agreement.

The bottom line

Gazumping is an unfortunate reality of buying property in England and Wales. While you can’t prevent it entirely, being prepared and moving quickly can reduce your risk.

The key is to:

• Get your finances in order before you start looking
• Move as fast as possible once your offer is accepted
• Consider protection like home buyers insurance
• Know when it’s worth fighting and when to walk away

Remember, the property market can be unpredictable, but with the right preparation, you can protect yourself and increase your chances of a successful purchase.

Getting help

If you’re looking to buy your first home or need advice about mortgages, speak to a qualified mortgage adviser who can help guide you through the process and explain your options.

Getting professional support can help you navigate the complexities of the property market and reduce the stress of buying a home.