In This Guide
Apply for a mortgage
Buying at auction
Buying in Scotland
Conveyancing
Find and view
Negotiate
Plan your purchase
Success and failure
1. Successful purchase
2. Don't forget
3. What is gazumping
4. Consequences of gazumping
5. Preventing gazumping
Surveys and valuations
To buy or not to buy
Success and failure
What is gazumping
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Gazumping is when a seller accepts an offer from one interested party, only to accept a higher offer later on from someone else. Incredibly annoying when it happens to you, it can throw your finances, your timing and your mood, leaving you right back where you started all those months ago.
Usually, plain old simple greed is the major factor in causing a vendor to accept a higher offer than your one. Sometimes it can be argued that it is your own fault. If the seller has set an exchange deadline and you are dithering, dallying and apparently stalling on the deal, then you are laying yourself open to being gazumped.
When the owner accepts your offer on a property, you enter the danger zone. You have to start spending money on the groundwork for the transaction without any binding guarantee that you are not going to be wasting your money. Once the owner has accepted your offer, you go ahead with the survey, confirmation of your mortgage offer and instruction of a solicitor. The solicitor will carry out local authority searches and other conveyancing tasks which all cost non-refundable sums of money.
However, until contracts are exchanged, the sale agreement is not legally binding. Both you and the owner can pull out at any time. It is not just vendors who pull out of deals at the last minute. Doing this is bad practice and leaves the other party with egg on their face, in their hair and all down their front.
Unfortunately for the buyer, agents are legally obliged to tell vendors about any other offers on the property. Even if the property is taken off the market once your offer is accepted, anyone who previously viewed the property can still make a bid. If they do, then the agent cannot keep this fact hidden from the vendor.
Most agents frown upon gazumping. Once a sale is agreed they generally like the deal to be completed as quickly as possible so that they can pocket their commission. The increased costs of communication, aggression from the gazumped buyer and minimal extra commission that 1% of the difference in prices equates to makes the whole process unworthwhile for the agent. It is also bad for their reputation, so some of them make vendors sign binding agreements that state that gazumping will not be permitted. Any offers they receive after they have accepted one must then be turned down.
That said, there are some unscrupulous agents and vendors out there who will do anything to bump up the price they can get for a house. In times when competition and demand is fierce, vendors will sometimes play buyers off against each other provoking something of a bidding war, while the agent sits back, does nothing and watches their commission rise.
For your information, the term gazumping is said to come from the Yiddish word "gazumph," meaning to swindle or overcharge. It broke into the mainstream in the 20s when gangsters started using the word in relation to a technique of conning a person by artificially bidding the price up. Over time, the meaning has changed slightly.
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