How common is gazumping & how to avoid being gazumped

Losing your dream home due to gazumping can be incredibly disheartening. You’ve invested time, money and emotions into the process, only to have it snatched away at the last minute. 

But you’re not alone. Gazumping, while legal in England and Wales, is a common concern for many buyers in today’s competitive housing market. 

In this guide, we will aim to provide clear information on what gazumping is, how it works, the impact of gazumping on buyers, whether gazumping is legal and what you can do to avoid gazumping. 

By understanding the landscape and taking proactive steps, you can navigate the house buying process with greater confidence and hopefully avoid the disappointment of gazumping. 

What is Gazumping?

Have you ever found your dream home, had your offer accepted and then lost it all at the last minute? That’s gazumping. It happens when someone comes in with a higher offer on a property you’re already in the process of buying, even after your offer has been accepted.

Gazumping can be incredibly frustrating, especially since it can occur anytime before contracts are exchanged, which means you haven’t legally secured the property yet.

The consequences of gazumping will mean that you unfortunately:

• Lose the house: The original seller will proceed with the new buyer, leaving you back in the search for your dream home.

• Potentially lose money: You may have already invested funds in surveys, legal fees or other property-related services, which cannot be recovered in most cases. 

Gazumping is legal in England and Wales, but not Scotland, and can happen even after your offer is accepted. It is only illegal, when your contracts have been exchanged with the seller. You should be prepared for the possibility of gazumping and take proactive steps to minimise the risk of it affecting you. 

How does Gazumping happen?

While we do not believe that gazumping is an ethical practice, understanding the process may help you as a buyer or seller prepare for the event to happen. 

Here is the gazumping process:

1. Initial Offer and Acceptance:

• A buyer makes an offer on a property, which the seller accepts, marking a verbal agreement.

2. Pre-contract Stage:

• The buyer initiates the purchase process, potentially involving activities like:

  • Arranging mortgage approval.

  • Conducting property surveys.

  • Incurring legal fees for conveyancing.

3. The Gazump:

• During this pre-contract stage, another buyer emerges with a higher offer for the property.

4. Seller's Decision:

• The seller, legally entitled to maximise their profit, has the option to:

  • Accept the higher offer: This leaves the original buyer without the property and potentially facing financial losses from invested time and resources.

  • Stick with the original offer: This scenario, while less common, happens if the seller values factors like good faith or avoiding delays caused by a broken chain.

5. Contract Exchange (if applicable):

• If the seller sticks with the original buyer, the legal process continues, leading to the crucial stage of contract exchange. This legally binds both parties to the sale.

• Once contracts are exchanged, gazumping becomes impossible.

Why does Gazumping happen?

Gazumping may happen because the seller receives a better offer from a different buyer, be this through a higher offer or faster completion. 

If the seller receives a higher offer, which is the most common reason for gazumping to occur, a competitor will have made a more attractive offer than you. This then tempts the seller to switch in order to earn more profit on the sale of their property.

The other reason gazumping occurs, is that sometimes a rival buyer might offer similar terms but with a faster completion date. This can be appealing to sellers, especially if they’re in a hurry to move on. 

In a seller’s market, with more buyers than available properties, sellers have more leverage and are more likely to be tempted by higher offers. If the initial buyer takes too long to complete the sale due to financial issues, indecisiveness, or a complex chain, the seller might seek alternative offers. 

Cash buyers often complete faster and without the need for mortgage approvals, making them more attractive to sellers, especially during tight deadlines like the Stamp Duty holiday. 

If the initial offer is significantly below the asking price, the seller might be more open to considering higher offers later.

Is Gazumping legal?

While it may feel unfair, gazumping is legal in England and Wales until the crucial stage of exchanging contracts. This means that even after your offer has been accepted, the seller is legally free to accept a higher offer from another buyer.

In Scotland, however, offers become legally binding once verbally accepted, preventing gazumping.

It’s important to understand that accepting an offer doesn’t automatically create a legally binding agreement in England and Wales. This is why you’ll often see properties advertised as “Sold Subject to Contract” (SSTC) - the sale is contingent on contracts being formally exchanged.

Do estate agents encourage gazumping?

A common concern is whether estate agents encourage gazumping in order to receive a higher commission. 

While gazumping can benefit the seller by securing a higher sale price, it’s important to understand that estate agents are legally obligated to present all offers to the seller, even after the initial offer has been accepted. 

This is to ensure they act in the best interests of their client, the seller. However, it’s important to be aware of unscrupulous practices like:

• Fake offers: In rare instances, some unethical estate agents might fabricate higher offers to pressure buyers into increasing their bids.

• Undue pressure: Some estate agents might exaggerate the urgency of competing offers or create a sense of panic to nudge buyers towards overbidding. 

Luckily, there are a few ways that you can protect yourself from these tactics, like asking for proof, setting a budget and reporting any concerns to the relevant regulatory body. 

Remember, reputable estate agents prioritise ethical conduct and transparency. If you have any concerns, don’t hesitate to ask questions and address them directly with the agent.

Will you get gazumped in 2024?

While gazumping was a frequent concern during the peak seller’s market of the pandemic, the current market shows different trends. Here’s a breakdown:

• Past: The COVID-19 era saw a surge in house prices and buyer demand, leading to more gazumping cases due to factors like:

• The Stamp Duty Holiday: This temporary tax break encouraged quicker deals, potentially leading to rushed decisions and higher offers.

• Shifting priorities: The pandemic caused many to seek properties in different areas, increasing competition and the risk of gazumping.

• Present: The current market leans towards buyers, with a significant number of sellers accepting offers below asking price. This shift in power dynamics makes gazumping less likely.

• Future: Although predicting the future is difficult, gazumping might become less prevalent in the near future, with gazundering (buyers lowering offers) potentially becoming more common as the market adjusts. 

Overall, while gazumping remains a possibility, the current buyer’s market suggests a lower risk compared to the peak of the pandemic. Staying informed about your specific market conditions and consulting with a property professional can provide further insights and help you navigate the buying process. 

Is Gazumping ethical?

While legal, gazumping is widely seen as unethical. It can cause significant frustration and financial losses for buyers who have already invested time and resources into the purchase process, such as surveys, solicitor fees, and potentially emotional commitment to the property.

A 2022 survey by Market Financial Solutions sheds light on the prevalence and ethical considerations surrounding gazumping. The survey questioned over 500 homeowners who had purchased a property within the last decade. Here are some of the key findings:

• 31% of respondents reported being gazumped at least once. This highlights the significant impact this practice has on buyers. 

• 26% admitted to gazumping another buyer, and 47% would consider it if it meant securing their desired property. This indicates a potential conflict of interest where personal gain is prioritised over ethical considerations. 

• Furthermore, the survey revealed that 79% of homebuyers support outlawing gazumping in England and Wales. Additionally, 80% favour legal reforms to curb gazumping practices. This strong public sentiment emphasises the desire for change in the current system. 

Gazumping raises substantial ethical concerns and is widely opposed by the public. The potential for financial and emotional distress caused by this practice highlights the need for potential solutions, such as legal reforms or alternative practices, to protect buyers in the UK property market.

What can you do if you are gazumped?

Being gazumped can be incredibly disappointing, and it can take an emotional toll on any buyer, first time or veteran house flipper. 

Luckily, there are still options that you can explore:

How to avoid being gazumped?

While avoiding gazumping entirely is impossible, as gazumping is down to human instinct and the sellers circumstances, here are a few steps you can take to minimise the risk of gazumping:

Preparation & organisation

Secure a mortgage agreement in principle before searching for a new home. This demonstrates financial readiness to the seller and allows for a quicker purchase process.

Choose & instruct a solicitor and surveyor beforehand to expedite the process once your offer is accepted. Gather all necessary documentation (ID, proof of income, etc) to avoid delays. 

Communication & rapport

Negotiate with the seller to take the property off the market after accepting your offer. This minimises the chances of other buyers finding making bids on the property. 

Get to know the seller on a personal level. Show genuine enthusiasm for the property and express your seriousness about buying. 

Discuss the possibility of a lock-out agreement with the seller. This agreement, signed by both parties, grants you exclusive rights to buy the property for a specific period. But, the legality and enforceability will vary depending on your location. 

Efficiency & action

Once your offer is accepted, act swiftly to complete the buying process. This reduces the window of opportunity for other buyers to make competing offers. 

Maintain regular communication with your solicitor, mortgage broker and surveyor. Promptly respond to requests and complete all the necessary tasks. 

You may also wish to consider Homebuyer Protection Insurance. While it won’t prevent gazumping, this insurance covers expenses like legal fees or survey costs if the sale falls through due to gazumping.

Why is a buyer pulling out due to gazumping a bad thing?

While gazumping can be tempting for sellers seeking a higher price, it's crucial to consider the potential downsides:

1. Risking a Less Reliable Buyer:

The initial buyer, despite offering a lower price, might have been dependable, easy to work with, and pre-approved for financing. Accepting a higher offer doesn't guarantee the new buyer will be as smooth or reliable throughout the process. The new buyer could:

• Have financing issues: This could lead to delays, complications, or even the deal falling through entirely, causing the seller to waste time and potentially incur additional costs.

• Be more demanding: The seller might face stricter deadlines or more negotiation hurdles, causing additional stress and potentially forcing concessions they wouldn't have needed to make with the original buyer.

2. Damaging Market Reputation:

If a seller gains a reputation for gazumping, it can deter future serious buyers from engaging with them. This could:

• Limit the pool of potential buyers: Fewer interested buyers could lead to a longer selling process and potentially lower offers overall.

• Raise concerns about trust and reliability: Buyers might be hesitant to invest time and resources in a property they fear could be taken away at the last minute due to gazumping.

3. Facing Ethical Concerns:

Some sellers, even if tempted by a higher offer, might feel unethical about gazumping, especially if they had already established a rapport with the initial buyer. This discomfort can create:

• Internal conflict: The seller might struggle with the decision, leading to unnecessary stress and potentially impacting their overall satisfaction with the sale.

• Strained relationships: The initial buyer might feel betrayed or mistreated, potentially damaging the seller's reputation and hindering future business relationships.

4. Uncertain Outcomes:

Even after accepting a higher offer, there's still a chance the deal could fall through due to various reasons unrelated to the initial buyer. These could include:

• New buyer's financing falling through

• Unexpected issues with the property inspection

• Changes in the new buyer's circumstances

If the deal falls through after gazumping, the seller is back to square one, potentially facing delays in their own plans and incurring additional marketing costs.

While the allure of a higher offer is understandable, it's essential for sellers to weigh the potential risks and drawbacks of gazumping before making a decision.  Choosing a reliable buyer and a smooth transaction might be a more strategic approach in the long run.

What to do if your buyer pulls out due to gazumping?

While frustrating, encountering a buyer who pulls out due to gazumping is not uncommon. Buyers generally pull out due to gazumping for one key reason: a higher offer emerges. This higher offer entices the seller to accept it instead of the original buyer’s offer, effectively pushing the original buyer out of the purchase. 

Here are some steps you can take to recover from a reliable buyer pulling out of your sale:

1. Understand the Situation:

Contact your estate agent to verify that gazumping is the reason the buyer is pulling out.

Consult your solicitor to understand your legal options and any potential claims you might have based on the terms of the contract.

2. Explore Options:

If you're truly attached to the buyer, consider counter-offering their higher offer to secure the sale. However, only proceed if it aligns with your financial comfort zone. If renegotiation isn't an option, you can choose to re-list the property with your estate agent. Consider strategies like:

• Competitive Re-listing: Price the property strategically to attract serious buyers quickly.

• Highlight Unique Features: Emphasise the property's unique selling points to stand out from similar listings.

• Consider Open Houses: Host open houses to generate interest from potential buyers.

If you have received other offers during the initial sale process, revisit them and see if any are still viable options.

3. Mitigate Losses (if applicable):

If you have home seller protection insurance, contact your provider to understand if any cover applies to your situation and the claims process.

If the buyer's withdrawal caused you significant inconvenience or financial loss, you might be able to negotiate compensation through your solicitor, especially if the contract had specific clauses regarding gazumping.

4. Consider a cash house buyer

If you have lost all potential buyers, and you need to sell quickly, you may want to consider selling to a cash house buyer like ourselves. Although we operate a Below Market Value property purchasing service, we do offer a completely transparent and honest process that will keep you in the loop at all times. 

Thousands of people have sold their house with us over the past 12 years, and we have thousands of excellent reviews to back that up. Not just this, but we can buy your house in as little as seven days, for cash, helping you to move on quickly. 

We don’t judge, and deal with properties of all sizes, prices, locations, circumstances and conditions. As long as it has a roof and a front door, and the possibility of being renovated, we will buy your house for cash. 

Want to sell your house fast, and for free? Put your postcode in the form below to receive our no-obligation cash offer direct to your inbox.