Tips To Guard Against Being Gazumped!
One in ten of Fool readers surveyed were gazumped when buying a property last year. But there are a few ways to protect yourself - check out these tips.
Is it me, or are we in the UK obsessed with property? Buying, selling, refurbishing, profiting from, letting, mortgages, are prices rising, are we heading for a crash - they are all top topics for TV shows, dinner party conversations, or for that matter a chat with just about anyone.
And one term that used to be a headline hitter but isn't heard of quite so often nowadays is gazumping. This is when a seller reneges on his agreement to sell a property to you at a certain price.
For example, let's say Jim offers £95k (the asking price) for a flat and his offer is accepted. A second buyer then comes along and makes a higher offer (£97k) 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 solicitors 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. But although you may think gazumping was a major problem of the Nineties, not now, unfortunately it seems that is far from the case. A recent survey of 2,000 readers carried out by ourselves at The Fool has found that over one in ten (12%) were gazumped in the last year!
What's more, 22% revealed that they would consider gazumping themselves if they found the ideal property, and 11% believed it to be a "necessary evil". Blimey.
As someone who has been looking for a property myself for the last few months, I can confirm that gazumping is just one of many nasty practices I've seen take place.
And while 73% of surveyed Fool readers think that gazumping should be made illegal, unfortunately our pretty outdated home buying system means we pretty much have to put up with the risk of gazumping until something changes.
So how can we help to avoid the risk of gazumping?
Well I've learnt a thing or two from my own experiences and that of friends, family and Fool readers. So without further ado, here are my top tips to help guard against being gazumped.
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 back burner 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 labeled "Under offer" or look for the tell tale "Sold" sign in the front garden -- and demand to know why if not.
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 such as a few years ago where properties could have increased in value by 2-3% every month). 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, on a positive note it's also something that tends to occur more in a rising property market, and with prices stagnating and even falling at the moment in some areas we may well see cases diminish.
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!