25 Oct Whats the difference between ‘gazumping’ and ‘gazundering’?
With about 25% of house sales collapsing before the exchange of contracts, the Government has launched an eight week review into the home selling process.
It is calling for evidence from estate agents, solicitors and mortgage lenders over the next eight weeks in an attempt to make property purchasing “cheaper, faster and less stressful”.
This includes launching a probe into ‘Gazumping’ and ‘Gazundering’. Whilst the terms appear comical, the effects are far from it.
So what is gazumping?
‘Gazumping’ derives from the Yiddish word ‘gazump’, meaning to steal or cheat.
Gazumping is the practice where people who have already put down an offer on a property are outbid by rival buyers. Estate Agents are legally required to put forward all offers received. So having accepted a bid, the seller then opts to accept an alternative bid from a competing buyer.
In England and Wales, even though an offer has been accepted, a house purchase is not legally binding until contracts have been exchanged.
Gazumping rarely happens in Scotland, because the agreement is legally binding earlier in the process – as soon as seller’s solicitor provides a signed written acceptance of a buyer’s offer, which may be ‘subject to survey’.
In most cases, gazumping happens because a higher offer has been made. However, it may also happen because a buyer is in a better position to move more quickly.
It occurs most frequently during times when there is a ‘seller’s market’, i.e. a shortage of property on the market. Often in this situation, the seller raises the asking price at the last minute after orally agreeing to a lower one often: this is referred to as ‘ghost gazumping’
Gazumping was rife during the property boom years of the 1980s and the boom and bust years of the early to mid-2000s
What about gazundering?
Gazundering is when a property buyer lowers their offer, just when contracts are about to be exchanged.
In most cases, gazundering happens because buyers know the seller is in a weaker position because their property has been off the market during the sales process, so they seize the opportunity to save themselves several thousand pounds.
However, it may also happen in an uncertain property market – if house prices seem to be falling, for example.
Occasionally a buyer will have been gazumped and so will have no option but to gazunder.
Why does it happen?
There’s a variety of reasons.
Time is a major factor. The exchange of contracts doesn’t happen until all paperwork is in order. This means the survey has taken place, the mortgage arranged, searches conducted and legal documents completed. This generally takes three months, depending on the number of people in the chain. How long it takes to have a survey done and how fast (or slow) the solicitor is will also be a factor.
In volatile markets where there are rises and falls in house price, a buyer (or a seller) can find themselves several months into the conveyancing process and realise that the investment that they are about to make, has changed in value.
Sometimes gazumping can happen when multiple agents are appointed to sell a property. If the property is sold with one of the appointed agents, the others sometimes redouble their efforts to find a buyer and get a higher bid.
How can you avoid being gazumped?
At present, there is no cast iron way to avoid being gazumped. However, you can lessen the chances by taking a few simple steps.
- Ensure you are ready to move. Stay ahead of the game by having your financing in place and by appointing a solicitor before making an offer.
- If you are buying in a boom market and the property has the “it” factor, don’t quibble – offer the asking price.
- Ensure your solicitor moves with speed.
- Get the survey done quickly.
- Call the seller or agent almost daily, to ensure they know you are keen to buy and make sure things are moving forward. That way, you are bound to find out if there are other offers around.
- Be reasonably amenable to the demands of the seller – if he particularly wants to keep the front-door knocker and to move on a certain day, try to fit in.
If you’d like to talk to us about the best way to buy or sell your property in Darlington or County Durham, call us today for a no-obligation chat on 01325-776424.