What is gazumping?
Gazumping, or outbidding a competitor on a property during the buying process, is a modern phenomenon.
Here's an example: let's say Jim offers £150,000 (the asking price) for a flat and his offer is accepted. A second buyer then comes along and makes a higher offer (£152,000) on the same flat – and Jim is told that the seller has decided to take the higher offer, unless Jim can match or beat it.
So even though Jim had agreed a sale with the seller already, he now finds he must either fork out another £2k+ or risk losing not just the flat, but any money he's already spent on solicitor's fees, land searches, surveys etc, which can easily add up to hundreds (or in some cases thousands) of pounds!
It's a hideous situation and one none of us would like to find ourselves in.
So how can we help to avoid the risk of gazumping?
1. Insist the property is removed from the market
Firstly, when making an offer ensure you insist that a condition of the deal is that the property is taken off the market. If potential gazumpers don't know about it, they can't make an offer on it.
This can also help you spot a seller that may be open to gazumping – if he wants to keep on marketing he's probably hoping someone will come in with a higher offer, while keeping you on the backburner as security (indeed you may find you need to make a difficult decision and walk away).
Check online sites such as Rightmove.com and Findaproperty.co.uk to ensure the property has been labelled "Under offer" or look for the telltale 'Sold' sign in the front garden – and if it's not there demand to know why.
2. Sell your property before buying another
Sellers may be more inclined to accept an alternative offer if there are delays in their sale, especially in a rising market. A major reason for delay is often that the seller's buyers can't find a buyer themselves. By making sure your property is at least under offer before putting in an offer you can help to reassure them that you're serious.
Ideally, if you can, consider selling your property completely and either staying with friends/family or renting before putting an offer in – as an effective cash buyer without a chain to potentially collapse you'll be seen as a very strong candidate.
3. Exchange contracts as quickly as possible
And on that note, the quicker the sale, the less time anyone has to gazump you. Make it your mission to keep everything moving as swiftly as possible. Make frequent calls to your solicitor to monitor progress, fill out required forms quickly and chase up anything you can.
Also, don't ignore the estate agent once things are proceeding – make sure you inform him when you've got a formal mortgage offer and when the survey has been completed. He can then feed this back. Remember, he wants to get the property off his books as quickly as possible too, so make him earn his fee.
4. Maintain a good relationship with the seller
Although it may sound idealistic, if you've got a good rapport with the seller in most cases he'll be less likely to let you down by accepting a rival bid.
Finally, although this may not work in practice, try and buy through an estate agent who has a policy on gazumping. Some do insist that sellers sign an agreement to turn down any offers once one has been accepted. You can also take out insurance to protect you, should your sale fall through.
And a more formal exclusivity agreement or contract can be drawn up by a solicitor to give you exclusive rights to the property, should the sale occur during an agreed timeframe. This will obviously involve a fee, but you might just think it's worth it.
Gazumping is clearly a horrible practice and one we should all be aware of. However, it's also something that tends to occur more in a rising property market.
But if you are unfortunate enough to be gazumped, one thing you can do is keep in contact with the agent and let him know how much you liked the property. If something should fall through with the gazumper's sale you'll be first in the queue. But of course, you may well have decided you'd rather not deal with that seller again....
Good luck with your property purchase!