Here at Expose Property, we explain these terms, how they can affect the home moving process and what buyers and sellers can do to lessen the chances of falling victim to them.
What is gazumping?
Put simply, gazumping occurs when a property seller accepts the buyer’s offer but then rejects it before the exchange of contracts in order to accept a higher offer from another buyer.
Gazumping can be devastating for the initial buyer as they must either accept the new higher price to surpass the other offer or withdraw from the transaction altogether.
Sellers are able to do this because verbal agreements are not legally binding. The written contract isn’t drawn up until relevant legal checks have been carried out – which can take as long as three months after the verbal acceptance.
Because of this, buyers are at risk of being gazumped and losing any money they’ve spent on fees so far, such as survey costs, conveyancing fees and mortgage arrangement fees.
Conversely, gazundering happens when a buyer has made an offer that has been accepted by the seller, but then revokes the offer to make a lower bid before contracts are signed.
Buyers who gazunder do so because they know the seller is in a weaker position. Since this can collapse an entire chain of property sales, the buyer hopes that the seller will accept the lower offer to avoid remarketing the property and starting from scratch.
This might also be because the seller may have removed the property from the market, or they may be in a chain themselves.
Prevention is always better than cure, and home movers will need to be wary of any signs that these unethical tactics may occur.
For instance, a buyer is less likely to be gazumped if the seller is part of a chain, as the seller wouldn’t want to put their own purchase at risk if the sale collapses.
To offset the chances of this happening, though, buyers will need to speed up the process by obtaining a mortgage in principle, finding a soliciting conveyancer in advance and lining a surveyor up quickly.
It also helps to get a lock-in agreement – also known as a preliminary, lock-out or exclusivity agreement – to ensure the seller does not negotiate with any other parties within a fixed period. This will allow buyers to arrange their mortgage without the fear of being gazumped.
Equally, a buyer is unlikely to gazunder the seller if they are emotionally invested in completing the transaction – especially in such a competitive market.
Sellers can lessen the risk of being gazundered by choosing a chain-free buyer, as they are more likely to move on quickly, and setting an exchange date as soon as possible to keep all parties focused on a shared goal. Being transparent throughout the process will also build a strong rapport.
Speed is vital on both occasions, and the faster you complete the transaction, the less likely it is that gazumping and gazundering will disrupt the process. This also gives both parties less time to introduce changes in the price.
To fully allay the chances of being gazundered or gazumped, you need to work with an experienced, reputable estate agent.
Here at Expose Property, we use our experience of listing homes in Beckenham, Penge, Crystal Palace and other places in South East London to keep you in line with current government guidelines and help to achieve a smooth sale. For more information, please get intouch with us today.