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Gazumping: a very real threat

20th April 2021

Gazumping is back. This last-minute bidding practice is, once again, causing havoc in the property market - especially as we head towards the end of the stamp duty holiday.

What is gazumping?

Gazumping is a totally legal practice that sometimes occurs once a seller has accepted a buyer’s offer. Another purchaser interested in the same property can come in with a higher offer right up until exchange happens – even if the deal has been verbally agreed and the property listing shows as SSTC (sold subject to contracts). There’s not much that can be done about gazumping pre-exchange, as an estate agent is bound to pass on all offers to the seller.

Why does gazumping happen?

Marketing conditions usually influence when gazumping is most prevalent. We usually see more gazumping when the supply and demand of property is out of kilter. More buyers than there are homes for sale leads to people making rash decisions as they become desperate to find a property and have an offer accepted.

It is currently estimated that almost one in four failed property sales is due to gazumping – fueled by a lack of available homes on the market and pressure to find a property to buy before the stamp duty holiday ends. Even big High Street agents, including Countrywide, have acknowledged that we’re in extreme times, with ‘multiple bids and a marked increase in gazumping’.

Can you avoid gazumping?

As a buyer, it can be heartbreaking - and costly - when a seller dumps you at the final hurdle in favour of an alternative purchaser, as you may have already invested time and money in conveyancing and surveying fees.

Here’s how you can avoid the threat of being gazumped:

  1. Ask for the property to be withdrawn: if other buyers can’t see the property, they won’t make an offer. Although a request is not always accepted, you can ask the seller to withdraw the property from the open market after your offer is accepted.
  2. Show you’re serious: genuine buyers will be looked upon more favourably, so always make an offer with a mortgage agreement in principle in place, a solicitor lined up and any home you are selling already under offer.
  3. Ask for a ‘lock out agreement’: this takes the form of a contract between the seller and the buyer. This gives the purchaser a period of exclusivity on the home, during which no other offers are considered. There will be a cost for a solicitor to draw up such a contract.
  4. Take out home buyer protection insurance: this won’t prevent gazumping but it may provide compensation, should it occur. These policies usually pay out to cover some of your upfront financial outlay if you’re gazumped, although this protection comes at a small upfront price.

Gazump the gazumper?

If you have your heart set on a property and find yourself gazumped – especially if you’re very close to exchanging contracts – you may think about increasing your original offer. Beware of getting caught up in a bidding war that pushes you outside of your financial comfort zone.

The auction alternative

The length of time between an offer being accepted and the safety of exchange – which can be weeks or even months – is an open door to gazumping but by buying at auction, you can slam that door firmly shut.

Open Online’s auctions - one of two ways we sell property fast - run on a reassuring ‘exchange on the day’ basis, meaning that once your bid is accepted and the gavel falls, no other buy can come in with a higher offer. We offer a degree of certainty in this fast-moving property market – peace-of-mind that your purchase will not be hijacked!

You’ll find more information about Open Online’s property auctions here or feel free to contact us to talk over your plans to buy an auction property.

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