Having the rug pulled when you have agreed a property purchase is a gut-wrenching and expensive experience, so take the right steps to minimise the risk.
Gazumping may be less prevalent right now – with the latest figures showing a fall in this happening but you still need to be prepared.
While this is good news for those looking to purchase a property, gazumping – where a seller accepts an offer, only to reject it later in favour of a last-minute offer from someone else – has not gone away.
Where is it happening?
London retains the crown as the gazumping capital, with 66% of buyers having been gazumped in 2018. This figure is up from 35% in 2017.
As anyone who has been gazumped will testify, it’s a horrible thing to have happen when you are trying to buy your dream home.
In many cases, unless you can somehow find the cash to make a higher counter offer, it means that a lot of time and money has been wasted – and that there’s no choice but to go back to square one and start the property search all over again.
You might expect this controversial and unpopular practice to be illegal – but it isn’t. Under English law, the agreement between you and the seller does not become legally binding until contracts have been exchanged.
Plans to reduce gazumping
The good news is that the Government is looking to help reduce the number of buyers who fall victim to gazumping by introducing what are known as ‘voluntary reservation agreements.’
If introduced, these measures could make the buying process a lot less stressful. In the meantime, there are steps you can take to reduce the risk of falling victim.
- Get organised
One of the simplest ways to reduce the risk of getting gazumped is by being organised and getting all your ducks in a row.
Make sure your finances are in place and that you’ve got a mortgage ‘agreement in principle.’ This is essentially a letter from a lender setting out how much they would be willing to lend, based on an initial assessment of your circumstances.
You also need to have a solicitor appointed – one who is available and proactive – and all the necessary documentation to hand, including the required ID.
If you are selling at the same time as buying, get your property on the market. Better still, get an offer on your current home before making an offer on the one you want to buy to ensure timing won’t be an issue.
The shorter the time between agreeing a sale and exchanging contracts, the less likely it is the deal will fall through.
- Get the property taken off the market
Once your offer is accepted, you should ask the seller to take the property off the market.
Make sure this is done in writing or it will not be legally binding, meaning the seller can change their mind at any time.
You should also ask the estate agent to remove signs from outside the property and remove its online listing.
While the seller and agent aren’t legally obliged to do this, you should question their reasons if they say no.
- Keep things moving quickly
Do all you can to keep the process moving along as quickly as possible. This means being in regular contact with your mortgage broker and conveyancing solicitor to ensure they respond quickly to requests for information.
Also make sure you read, sign and return forms as promptly as possible. You don’t want your case to fall by the wayside, or things could drag very slowly.
- Get friendly with the sellers
There are no guarantees this will work, but if you take the time to get to know the sellers – and show them you’re a serious buyer with your heart set on the property they’re selling – there’s less chance of them dropping you at the last minute for a better offer.
- Consider a lock-out agreement
You might want to think about a ‘lock-out agreement’ or ‘exclusivity agreement.’
This is where the vendor agrees not to seek, or accept, other offers from other buyers for a certain short period.
While this can help demonstrate how serious you are, the issue you may have is getting the seller to sign it.
Talk to your solicitor to find out what’s involved – and the potential cost of drawing up one of these agreements. But be warned that it can get fairly complex.
- Take out specialist insurance
In addition, you might want to look into taking out Home Buyers Protection Insurance.
A policy covers you for the loss of upfront expenses you’ve made in good faith to purchase a property (such as legal, survey and mortgage lending costs), in the event of the purchase falling through.
- Considering buying at auction
Buying at auction means there is no risk of gazumping – but it does come with a lot of different risks – so don’t make any hasty decisions, as you need to go in with your eyes firmly open.
So that concludes this episode of Ask the Estate Agent Podcast. You can contact us anytime using the links below:
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