What is gazumping? Why does it happen in England and Wales and not in Scotland? And how can you avoid it?
'Gazumping' derives from the Yiddish word ‘gazump’, meaning to steal or cheat. It's used to refer to the process whereby a vendor (seller) accepts a verbal offer from a prospective purchaser (buyer) of a residential property and then accepts a higher offer from another buyer. The first buyer is said to have been 'gazumped'.
Estate agents have to keep their clients informed of any offers received for the property, even if an offer has been accepted verbally, under the Estate Agency Act 1979.
Offers in England and Wales are subject to contract and until the exchange of contracts there is no redress for the purchaser. The purchaser can be out of pocket financially if the sale falls through, having already paid for a mortgage application, property searches and other legal costs.
Gazumping is not a problem in Scotland, as once an offer is accepted the offer cannot be withdrawn.
It occurs most frequently during times when there is a 'seller's market', i.e. a shortage of property on the market. Often in this situation the seller raises the asking price at the last minute after orally agreeing to a lower one often: this is referred to as ‘ghost gazumping’
Gazumping was rife during the property boom years of the 1980s and the boom and bust years of the early to mid-2000s.
How to avoid being a victim of gazumping
- Instruct your solicitor to use exclusivity or lock-in agreements for non-refundable deposits
- Ask the seller to agree in writing to withdraw property from the market once verbal offer has been received
- Keep the seller and estate agent up to date on progress being made toward exchange of contracts
- Buy at an auction
- Buy using sealed bids
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