Goodbye, Gazumpers!

The days of gazumping may be set to come to an end, as it has recently been announced that Government officials have been holding meetings to discuss outlawing the act to protect buyers who are misled by property firms. Around £270 million is wasted a year on fees that result in failed house purchases in England and Wales (1), many as a result of gazumping.

david cameron with government officials

What is gazumping?

Gazumping is where a buyer makes an offer to a salesperson on a property and the salesperson verbally accepts the offer, but then proceeds to keep the building on the market and accepts a higher offer from another buyer. It’s been found that around 200,000 deals collapse annually due to gazumping, which results in the unsuccessful bidder having to pay off legal fees and surveys. As house sales usually take from 14 to 16 weeks to finalise, it seems uncommon that another person may make a higher bid on a property.

During the Budget in March, it was raised that property consumers’ money should be made more secure when purchasing. It was stated that they will "publish a call for evidence on how to make the method better value for money and more consumer friendly." (1) This will hopefully bring an end to gazumping and draw more people into the market.

How can I avoid being gazumped?

Whilst gazumping is still legal, many investors are still at risk of being tricked by estate agents, but if you take the right actions you can secure the purchase of your estate.

First off, make sure that you have everything ready to go ahead with the payment by having finance available. If you're planning to have a mortgage on the property then make sure the lender is prepared to provide the money for when the transaction takes place. When your offer has been accepted you want to act as quick as you can to get the building checked out. Arrange for a survey to be taken on the property to ensure that it's all in shape & advise you on what changes should take place for the property. Although this may take some time the quicker it's over with the faster you can seal the deal.

You will also want to convince the seller to take the property off the market, this way people can't find out about it, which greatly reduces the chances of being gazumped, this will be easier to do if you manage to maintain a healthy relationship with the seller. You'll also want to hire a conveyancer to help make the process of transferring ownership to you much easier, they will manage payments and file important paperwork to speed up the buying scheme but make sure you check on them regularly to monitor the progress of the sale.

sale agreed post

If you want to be as secure as possible with the agreement, an optional method is to arrange a lock-in agreement. This is where both parties pay each other a non-refundable deposit, which usually amounts to a small percentage of the property price, to make sure they don't lose out on money - if anybody backs out then the remaining person will receive the deposit. This method is a more formal approach and can take more time to finalise the deal, but is a safer option for those new to the market. A lock-in agreement can still be broken, but is more enforced as both seller & buyer agree not to negotiate with third parties, this is collected in writing and only stands for a limited amount of time agreed by both parties, once the period is over the buyer can then sell the property to another person if they wish (2).

A final resort to cashing back is purchasing home buyer insurance to cover some lost fees from being gazumped, companies offer premium policies from £42.95, but could get you pack up to £1500 (3). This acts as a safety net if the worst happens so it's better to be sure and cover your losses than be left without the property and a chunk of cash gone from your bank.

If gazumping comes to an end in 2016 investors can confidently invest in property with a secure method of trading which may boost a number of new investors that year. The law will also help decline the number of investments from falling through annually that can give the market a massive boost.

Sources

1. GOV UK - Budget 2016

2. Inbrief - Lock Out Agreements

3. Searchpoint - Home Buyers Protection


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