The term ‘gazumping’ is a term that may be familiar to you, however, have you may not be sure of what it is about. The word ‘Gazumping’ is terminology for when the seller of the property you are interested in accepts another offer from another party, prior to your purchase being completed.
Originating from the Yiddish word ‘Gezump’, it was used to describe when someone swindles or cheats someone out of something, being primarily used way back in the 1920s.
Now ‘Gazumping’, it is a word prominent in house buying and was regularly used in the 1970-80s.
Through our experience as a mortgage broker in Beverley, we have been able to speak with customers regularly on the topic of Gazumping. We’re often asked if Gazumping is illegal, and the unfortunate answer to this, is that it’s not.
This is something that many home buyers may be asking when they go through the home buying and mortgage process across the country. Nobody quite understands how this type of practice is legal, despite how immoral it is.
The reason that Gazumping is deemed to be completely fine and legal, is because you and the seller are not contractually bound, no meeting with lawyers has taken place. As such, they have no obligation to sell to you, as your agreement has only been verbal.
The idea of being gazumped can be a scary one for first time buyers in Beverley especially, even if it may be less likely to occur. It’s an understandable feeling, as this gives you the risk of losing your dream home and nobody wants that to happen, especially if you are in a property chain.
Another factor that can affect home buyers is the idea that they may lose money from being Gazumped. Non-refundable expenses that are involved with the home buying process such as property surveys, conveyancing fees and mortgage arrangements fees.
As touched upon above, the agreement between both parties to buy or sell a property, whilst you may want it to be honoured, is not legally binding. This only happens when lawyers exchange contracts to make it official.
It is not a simple process to make this happen. The mortgage process can often take several weeks, with the point between an offer being accepted and the contracts being exchanged taking quite a while to happen.
It’s generally during this step where an eager first time buyer in Beverley may jump in whilst your process is going on, and make a much more preferable offer to the seller of the property. They can do this either by speaking with the estate agent or going directly to the seller themselves.
The more favourable deal may also include things such as a higher purchase price, a faster sale or a particular buyer who is not going through a property chain. Gazumping covers all these circumstances wherein a seller may prefer another buyer over you, despite giving their word.
One factor that could impact the chances of being Gazumped by a seller is the type of market that is currently happening, such as a sellers market or a buyers market.
For example, if the market is currently a sellers market, this means that there is a very popular, busy market. Commonplace occurrences are high demand, fewer properties, people wanting to buy and bidding wars between buyers that could see property prices rise.
In this instance, you will find that Gazumping is much more likely to happen, because someone may jump in with a higher bid for the seller, who at that point may be likely to accept.
On the other side of the coin, if the market is currently a buyers market, this means there are more houses than buyers, and a seller may not be receiving a lot of offers. This means you have less chance of someone Gazumping you and there is more space for price negotiations with the seller.
One of the reasons why you may experience a delay between your offer being accepted and the contract exchange, could be because you need a property survey to be carried out.
Below are some useful ways in which you could increase the possibility of you achieving higher mortgage success and avoiding being Gazumped.
We would recommend that you first ask the seller to remove the property from the open market. They’re under no obligation to do this, but doing so means the property is not as visible to potential Gazumpers.
We typically find a lot of sellers will honour their buyers request and indeed remove it from the open market, especially if it is a buyers market and they aren’t receiving many offers.
Putting in place a lock-in agreement, where both sides will make a deposit towards a binding agreement between one another, can be another handy trick. If any one party chose to withdraw or alter their deal, the other party would keep that parties deposit.
This can be costly due to the legal fees involved, though it may very well be worth the money saved and security provided to you during your mortgage process.
You could also look at insurance products, as having something in place to protect you from Gazumping can be a useful way to save yourself from losing money.
Even though Gazumping can never be 100% prevented, there are lots of ways to protect yourself as a buyer. As an open & honest mortgage broker in Beverley, we are here to help.
Book a free mortgage appointment today and see how our helpful team are able to help you on your mortgage journey as a first time buyer in Beverley.