Gazumping – You’d never want it to happen to you!

The problem in England and Wales is that until contracts have been exchanged the sale agreement is not legally binding. Until that point, the current system permits buyers and sellers to pull out of the agreement, and the practices of gazundering and gazumping!

Last week I described the awful practice of gazundering, sprung on sellers by their purchaser, and advised planning a strategy in advance just in case. And this week, I will look at the issue of gazumping where the roles are reversed.

Gazumping happens when a seller, who has already accepted a buyer’s offer, decides to accept a higher offer from someone else. The first buyer is left with two possible choices: they offer a higher price and get into a potential bidding war, or they decide to let the property go, lose out and look for an alternative.

From a buyer’s point of view, gazumping is not only a stressful experience but it also costs money when surveys, searches and other fees have already been incurred.

This practice is popular when property prices rise and when there are more buyers than sellers in the market.

As a buyer, how can you try avoiding being gazumped? Unfortunately, there isn’t much you can do about it, but there are some precautions you can take:

• Ensure that the buying process is as quick as possible; the quicker the better, as it will provide less opportunity for the seller to receive and consider offers, play games, or even pull out of the sale altogether.


• Before making an offer, find out if the estate agent has a policy on gazumping. Some agents request sellers to sign an agreement to turn down any further offers after one has been accepted.


• After your offer is accepted, ensure that you regularly communicate with the estate agent/vendor to let them know about your buying progress status: inform them when the survey will take place; let them know when the survey is completed; update them on the status of your mortgage offer, etc.


• Persuade the seller to sign a “lockout agreement” when your offer is accepted. The seller signs this agreement stating that they will not accept another offer from anyone else as long as the contracts are exchanged within a set time. You should use a solicitor to draw this up.


• Another possibility is a “pre-contract deposit agreement”. This means that each side pays a deposit (an agreed percentage of the purchase price) that will be lost if they pull out without a good reason. Obviously this agreement does not completely guarantee a smooth transaction as either party can pull out if they are willing to lose the deposit. But it will reduce the risk of being gazumped. And if you become a gazumped buyer, you will get some compensation. You should use a solicitor to draw up this agreement.


• Some insurance companies offer gazumping insurance policies to cover fees you might have incurred. Always weigh up the cost of insurance policies and read the small print!

As a buyer, always be prepared for the eventuality of being gazumped. Try to not set your heart on the property until it is signed and sealed. But if you really want it or have no other choice then ensure that you have a contingency plan allowing you to increase your initial offer.

And if you are gazumped but you don’t want to make a higher offer, let the estate agent and vendor know if you are still keen on the property. If the other buyer with the higher offer pulls out, you may still be in with a chance of securing the property if that’s what you want.

As I’ve said before, any negotiation should be based on trust and be fair to both parties. My advice is always to agree on a price at the beginning of the transaction and stick to it.

Laurent Stadelmann
Managing Director

Chez-Vous HomeSearch
Removing stress from the property process!

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laurent@chez-vous.biz
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