Gazumping Uncovered

What is Gazumping?

Congratulations, you’ve found your dream home and your offer has been accepted! You’ve applied for your mortgage, arranged a survey and instructed your solicitor who has started conducting searches. And then the worst happens… You get gazumped.

Gazumping definition

When another homebuyer outbids you and the seller accepts their offer over yours, despite your previous agreement.

Gazumping on the rise

Dubbed "the property curse of the 1980s", gazumping is becoming commonplace again. We recently conducted a survey with YouGov of 1,300 British homeowners and found that one in ten people have been gazumped as a result of a sneaky move to undercut would-be home buyers.

As people clamour to get on the property ladder, "2.57 million Brits [are] losing out on a property purchase because another buyer was able to present a more attractive offer," according to Market Financial Solutions.

And it's not just the disappointment of losing your new home, but also losing money after you've got the ball rolling on legal and financial matters. Our research found that 53% of those gazumped had lost money, on top of the property they had hoped to purchase, with 14% of those people losing more than £1,000 to intermediaries including solicitors and surveyors.

With an average processing time of six weeks for a mortgage from a traditional high-street lender, this can delay the purchase process while solicitors are already carrying out searches. If the buyers have not requested for the property to be taken off the market during this time, it leaves them open to gazumping should another buyer out-bid them.

Shockingly, property buyers who get gazumped lose an average of £2,899 in fees, which equated to more than £4.4 billion being lost in the UK in the last year, according to Which?. This is due to the cost of local searches carried out by conveyancers, which cost between £250 and £300, in addition to legal fees charged by the conveyancers (varies from practice to practice) and the valuation fee charged by mortgage lender for assessing the property, which is between £150 and £1,500.

See our Gazumping infographic

How to avoid gazumping

1. Request that the property should be taken off the market

Check that the property is listed as 'under offer' on the estate agent's site. It is even worth requesting that it is taken off the market altogether. They may not feel comfortable with this, but if your offer is high enough, the seller may agree.

2. Move fast

It’s always good to keep on top of the all parties involved e.g. Mortgage Broker, Conveyancer, Estate Agents so that contracts are exchanged as quickly as possible. Once this has been done, the agreement is legally binding and the pressure is off.

3. Become friendly with the sellers

Developing a good relationship with the seller can really help. Keeping them updating and showing that you're keen to move the process along shows you're serious about the offer and won't drop out. Plus, they're less likely to gazump a friend!

4. A lock in agreement

A lock in agreement means that the seller agrees not to negotiate with any other potential buyers. This gives you time to arrange your mortgage and get everything in order without being gazumped.

5. Home Buyer's Insurance

The most secure ways to protect your finances from gazumping is by taking out Home Buyer's Insurance. For a fee of £35, you can recover money spent on readying the house for purchase, which you would otherwise lose if you were gazumped. You pay no excess and the policy is valid for 120 days.

HBI will protect:

  • Conveyancing and search fees up to £1,500
  • Survey and mortgage valuation fees up to £500
  • Mortgage arrangement and lenders fees up to £250

The policy is easy to buy and as well as gazumping protection, it can protect buyers if the seller changes their mind and withdraws the property prior to exchanging contracts; or if the mortgage lender valuation is lower than the accepted offer; or if the survey identifies repair work on the property that would alter its value.

As the buyer, you would also be protected by Home Buyer's Insurance should you experience a job relocation or redundancy between your offer being accepted and exchanging contracts which would make you unable to complete the purchase. Our research found that 45% of people who haven't purchased Home Buyer's Insurance before would consider it for their next home purchase to ensure that they are protected.

Unfortunately, 82% of people have never heard of the insurance, which could have saved them thousands after being gazumped. The findings showed that the risk of losing money is compounded by a lack of understanding of Home Buyer's Insurance (HBI).

It's a shame that gazumping has become so commonplace, but in the midst of a housing shortage where first time buyers are desperate to get on the property ladder, some people are even using gazumping as a strategic step to buying a house.

"Our data highlights that this year, 1.03 million Britons are planning strategic, last-minute house bids on properties that have already had offers accepted on them in the hope of beating how other buyers and quickly completing a property purchase," reported Market Financial Solutions.

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Is gazumping legal?

Gazumping is legal in England, Wales and Northern Ireland, but it is outlawed in Scotland and many European countries.

There were talks within the Government in 2016 to outlaw gazumping, with George Osborne even highlighting the issue in his Budget speech when he was Chancellor: "We will publish a call for evidence on how to make the process better value for money and more consumer friendly."

This would bring England and Wales in line with current Scottish law where once an offer is accepted the sale is final, but these declarations are yet to come to fruition and Philip Hammond did not raise the issue in the 2017 Budget.

Communities Secretary Sajid Javid has now launched a review into home-buying and selling, wanting to “hear from the industry” about ways to modernise and improve the housing market. Clearly change is coming, and this can only be a good thing.

However, until the Government does something to protect homebuyers from this practice, it's a smart decision to take out Home Buyer's Insurance to ensure that you don't lose money spent on fees when buying a house, as well as your potential new home. Don't risk the double disappointment of being gazumped.

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