Apart from the fact that it is a funny-sounding word, gazumping is an actual occurrence in real estate. It happens when the buyer places an offer to purchase a property from the seller. Still, at some point, the seller accepts a different offer (usually a better one) from another buyer.
A lot of problems come with gazumping, especially if you are on the receiving end of it. Not only does it mean you are back to square one when finding a property to buy, but it can also mean a financial loss since you have done surveys, contacted solicitors, etc. You could be out of pocket on fees and mortgage arrangements. It is of utmost importance to learn what gazumping is and what you can do to minimise its risks.
Even though it is unfortunate when it ends up happening to you, it is not illegal in Wales and England. Essentially, any arrangement between a property's buyer and seller is not legally binding until both parties exchange contracts. The parties may have only a verbal agreement, but the seller is within their right to accept another buyer's offer.
Even though it is not illegal, gazumping is bad. But you are not defenceless against it, or at least not without any options whatsoever. Following are a few ideas on what you can do to reduce the chances of it happening to you:
In an ideal world, you will be ready with all purchase elements when you make your initial offer. But it is usually not the case. That is why you should be ready to act fast, conduct a survey and instruct the professionals you work with to move the deal along. The faster you are during this process, the less chance there is for gazumping to occur.
Obtain a mortgage in principle – getting a mortgage in principle is one of the few things you can be proactive about when you set out to buy a house. It means having a conditional offer by a lender, which points they will lend you a certain amount, in principle, as long as you meet their criteria. This mortgage agreement means you can move a property deal along quite faster.
Find a conveyancing solicitor ahead of time if you want to move things fast. This is the person making any payments through to the seller. Anyone who can get money across promptly reduces the chances of gazumping.
When you make an offer, make sure to include taking the property off the market. This signals that you are committed to the deal and a serious buyer. And while it is true the seller may not necessarily take the property off the market, they can agree to it if they find you serious about it.
A binding agreement stating that the seller will not negotiate with further buyers within a fixed period. During that time, you should move quickly to secure a mortgage, get the survey done and do all of the extra work to acquire that property.
Finally, you can get insurance, which can pay you a certain amount, in the case of gazumping. And while you cannot ever be sure whether you will get gazumped, you can at least reduce the financial risks associated.
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