Buying a New Home in Lincoln | What Is Gazumping?
Buying a New Home What Is Gazumping & What You Need to Know
Fast & Friendly Mortgage Advice in Lincoln
Buying a New Home, what Is Gazumping? You are about to purchase a property, carried out all the research. Had a verbal offer accepted by the agent and even worked on the mortgage arrangements, you are home and dry and on your way to the house of your dreams?
Suddenly the seller informs you they have accepted a higher offer from another buyer, pushing you out of the deal. This is gazumping. This article will explain everything related to gazumping.
Legality of Gazumping
It may certainly feel ‘unfair’ but in England and Wales, gazumping is perfectly legal. The agreement for property buying or selling only actually becomes legally binding once you have exchanged the signed contracts. There is no binding contract until this time, so no party will be liable for any verbal agreement made.
It is common to have a period of time of several weeks between a verbal agreement between the buyer and seller of the property and the actual agreement being signed. This is due to various factors such as a property survey and a conveyancer running the required searches and receiving a mortgage offer. During this period the seller can accept another buyer’s offer. This usually happens for properties with higher demands which increases that property’s worth.
It is also possible that the seller chooses someone else’s offer, they could be keen to sell the property quickly and they may choose another offer due to, for example, if there are delays at the ‘purchasing’ side, such as with the mortgage application.
Avoid Being Gazumped When Buying a New Home
Clearly, there is no fool-proof method to not be gazumped, but being prepared and taking certain steps will lessen the probability of being gazumped.
While you may not be able to arrange everything beforehand, you can make provisions for surveys, find surveyors in advance and other related elements of purchase to be able to complete these steps quickly and look to complete the purchase a quickly as possible.
Arrange a ‘mortgage agreement in principle’, this is a conditional offer for you to receive a mortgage if certain conditions are met, do this before looking for properties. This helps to quicken the mortgage process at the later stage. Also, find a conveyancing solicitor ahead of time with to work with.
You could ask the seller to take the property off the market as part of the offer. While a seller if not required to take the property off the market before any legal documents, it is helpful and many sellers will do so particularly if the housing market is ‘flat’. Also, keep them informed with regards to your progress in concerning the house purchase, searches, mortgage arrangements. This helps to build a relationship and provides them with ‘confidence’ in the sale process.
You could arrange a preliminary (also known as lock-in, lock-out, or exclusivity) agreement from the seller. The seller is then obliged to not get involved in negotiations for the same property for a certain time period while you work on mortgage and other property buying requirements.
Insurance for ‘Gazumping’
Lastly, there are insurance policies available to provide cover for any losses if gazumping takes place. Should the sale fall through due to the seller changing their minds or accepts another offer, you will be able to claim back some of your expenditure, such as conveyancing fees, survey fees and any other costs you may that you may have had to payout. This typically costs around £50 and is valid for 120 days, worth considering.
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