City A.M. | 21 June 2019

WHAT IS GAZUMPING?

Gazumping occurs when a buyer has had an offer to purchase a property accepted by the seller, but before the sale is exchanged the seller accepts another offer from another buyer. This is something that our team at INHOUS has experienced first-hand and on numerous occasions in the past few months, particularly across the Prime Central London market.

As unjust as it may feel when you are on the receiving end, the truth is that gazumping is a perfectly legal aspect of the property-buying process in England and Wales.

The reason for this is that an agreement to buy or sell a property does not become legally binding until written contracts are exchanged, which can come several weeks after an offer has been accepted. Strictly speaking, a buyer can be gazumped if the seller decides to reject their offer in favour of another buyer’s for any reason, such as delays in conveyancing or financial arrangements, not simply for a higher bid.

WHY IS GAZUMPING ON THE RISE?

Instances of gazumping have been few and far between for the past five years. However, a shortage of housing stock in the Prime Central London market and the emergence of more competitive prices has ignited a very real trend in gazumping.

Other key factors fuelling this rise include the readjustment of housing prices and a desire to purchase property again. For example, fewer transactions are taking place in Super Prime Central London but at more realistic prices, which means people are starting to seriously consider property again – particularly before the UK leaves the EU later this year.

Simultaneously however, agents are currently under incredible pressure because there are still so few properties on the market and this leads to the overvaluing of property by 15 to 20 per cent. This makes it hard for a vendor to accept an offer when it comes in at market value because they are frequently misled by their agent.

HOW TO AVOID BEING GAZUMPED

Our advice to buyers is to compile a substantially written argument when submitting an offer on a property, instead of a verbal offer. The written offer should include proof of funds and be drafted by solicitors or with a financial broker’s details to verify that the offer is reliable.

Building a trustworthy case makes it very hard for vendors not to take an offer seriously so we recommend buyers to prepare comparable evidence for their agent to share in full. We also strongly suggest offering a quick exchange period, preferably five working days. A speedy transaction is exactly what a vendor is looking for in this current climate so having all the facts in one place is extremely attractive and much harder to turn down.

City A.M.

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