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The return of Gazumping!
- AuthorJane Williams
Research shows that gazumping is back in the property market and Jane Williams, a partner at Martin Tolhurst Solicitors, the South East’s busiest conveyancing firm, has looked at the reason behind gazumping.
Research from Countrywide Estate Agency shows that one in 20 offers on properties in the South East that were originally accepted by a seller in 2017 are subsequently being rejected in favour of the higher one from a different buyer. The research shows that the number of properties on which gazumping has occurred is up by 35% on 2011. Gazumping is a fraught business for home buyers – when a buyer has an offer accepted on a property then they start to emotionally invest in that property and dream of living there. “It comes as a real shock and disappointment if an estate agent rings them to tell them that someone has made a higher offer and the seller is now going to sell to the new buyer rather than them” said Jane Williams.
The return of gazumping is strange as the level of residential property transactions has fallen from its recent high. Higher stamp duty tax rates, Brexit and potential higher mortgage rates have put off some buyers from taking the plunge. Jane commented, “The real reason that it has returned in my opinion is the lack of housing stock. Over the last three years the number of properties being put on the market has fallen consistently and estate agents are reporting stock records have slipped to a record low. When a sought-after property comes on to the market there are usually a number of potential buyers and this leads to a bidding war. A good estate agent will ensure that such properties achieve more than their original asking price. However some buyers are so desperate that even when they have been outbid, or they are a new buyer in the area, they are prepared to offer more even though the property has been sold, subject to contract. We have found from the many thousands of transactions that we deal with that sellers naturally find it hard to reject a higher offer that may mean that they are £5,000 - £40,000 better off than they had anticipated. The estate agent is under a duty to put forward all offers received at any time. For the original buyer, who loses out, this can be an expensive business as they are likely to have incurred search costs, survey fees and some mortgage costs. For many disappointed buyers however it is not the financial cost but the loss of losing a property that they have mentally moved into that is the biggest disappointment”.
Jane continued “We have acted for buyers who have ended up disappointed and bitter that the current system does not give them a clear run at the property once their offer has been accepted. However it is very unlikely that there will be any changes to how people buy/sell properties in England & Wales over the next two years and if housing stock for sale continues to fall then the problem may get worse. The number of houses for sale on the market has decreased in Kent by nearly 25% in the period 2011 -2017 and if that trend continues then buyers will become more desperate to find the properties that they dream of, and be prepared to go to extreme lengths to secure them.”
What can buyer’s do? These are our top tips to avoid being gazumped if you are a buyer in a good position:
- Prove that you are serious. Whilst the seller may not be able to resist a significantly higher financial offer they may be prepared to give you as the original buyer a chance if you have shown clear commitment such as booking a survey early, ensuring your mortgage offer is issued quickly, and getting on with the legal process by your solicitors.
- Get to know the sellers. Sellers are much less likely to see the matter just as a financial or legal transaction if they too have some emotional investment in you as their buyer. Do not overcrowd them but ensure that they are aware of your plans in the property and how serious you are about buying it.
- Take control and move to exchange of contracts quickly. The quicker you get to exchange contracts the better as once contracts are exchanged the seller will not be in a position to accept any other offers. Ensure that you devote as much time to getting quickly to exchange if possible – keep in touch with your mortgage broker, solicitor and estate agent and ensure that good progress is made each week. The national average for exchange of contracts on a freehold property (from instruction) is 8-9 weeks and by being proactive you can halve that.
- Make sure the property you offer on is only with one agent. We often find that gazumping occurs where there is more than one agent offering the property and the second agent, who did not secure the original buyer, will be very keen to try and persuade the seller to take an alternative offer through them. You minimise your chances of being gazumped where there is only one estate agent offering the property for sale.
- Request that the seller removes the property from the market. Ask the sellers to stop marketing the property and have no more viewing once your offer has been accepted.
- Protect yourself with insurance. Home owners protection insurance will cover your cost if you are unfortunately gazumped – the premium is around £60, and will cover survey fees and legal costs where you end up losing out on the property. It will not necessarily help repay your disappointment though!
If you would like further information or a quotation relating to our Conveyancing services, speak to our New Business Team on: 01795 416933.