If you are involved in the house buying or selling process and are asking the question “What is Gazumping”, someone may have made a larger offer than the one already made and accepted in the sale of a house, because that is the meaning of Gazumping in the UK.
Gazumping is the name given when one person makes an offer to buy a house for more money than an offer that has already been accepted and this offer is accepted, meaning the first buyer loses out.
By way of an example, lets say Buyer 1 makes an offer to buy a house that is for sale at an asking priced of £450,000 for £440,000. The seller agrees to accept the offer, and so solicitors for both sides start to get the paperwork ready to sell the house from the Seller to Buyer 1.
After a few weeks, Buyer 2 decides that he really wants to buy the property, but he sees that the For Sale sign in the front garden of the property now has Sold Subject To Contract (STC) on it.
Buyer 2 is disappointed that the property has been sold, but decides that a call to the estate agent for the property is worth a chance.
She calls the estate agent who confirms that the house is Sold STC. Buyer 2 asks if that means that there is any chance she will be able to still buy the house.
The estate agent says that all is looking good for the sale to go ahead, so they cannot see a reason for it coming back on the market.
“What if I made a larger offer to buy the house than the one that has already been made?” asks Buyer 2?
“Well, I would be obliged to let my client (the Seller) know if you did.”
“How much was the offer made?” asks Buyer 2?
“I am afraid I cannot tell you that” says the Estate Agent.
Buyer 2 thinks about this for a moment, and decides that the offer made was probably not the full asking price, as it rarely is, so says to the Estate Agent:
“Please let the Seller know that I am offering the full asking price of £450,000, I am a cash buyer, and I can complete the sale as quickly as they would like – the sooner the better for me.”
“Very well” says the Estate Agent.
The Estate Agent passes on the offer to the Seller, who, when the Estate Agent explains that as no Exchange Of Contracts has taken place, and the property is only Sold, subject to contracts being exchanged, the seller is completely within their rights to accept the offer.
Even though Buyer 1 has instructed a solicitor to start preparing the contracts, has incurred other fees as well as the solicitors such as search fees and survey fees, the Seller is completely within their rights to accept the higher offer and is not responsible for Buyer 1’s costs at all.
Is Gazumping Illegal?
Owing to the antiquated conveyancing laws in England & Wales, there is absolutely nothing wrong with the Seller or Buyer 2’s actions.
There is no law in place to cover the act of Gazumping, so it is not illegal whatsoever.
It may be considered morally inappropriate or at least bad sport, but that does not stop it happening time and time again, particularly in a property market that is moving very fast.
Sometimes, people even Gazump the originally accepted offer by offering more than the asking price of the property because they are desperate to buy this property.
For example, in the scenario above Buyer 2 could have made an offer of £460,000, £10,000 more than the asking price, to ensure that their offer would be taken seriously by the Seller.
Let’s look at this from the viewpoint of a Seller.
Should I Accept A Gazumping Offer?
Legally, if a seller is asking themselves “Should I accept a Gazumping offer”, the first and main point to consider is the one above; it is not illegal.
Therefore, the only question or moral issue is whether the Seller feels that they an accept the offer knowing that Buyer 1 has already incurred expenses and set their heart on moving into their property.
How heavily this might weigh on the Sellers mind would be dependant on:
- How far into the conveyancing process they are. If the offer was accepted several weeks ago, all of the searches have been made, the survey completed, a mortgage offer made to the buyer and contracts are very close to being exchanged, then pulling out at this stage is going to cause a lot of expense and anguish to the buyer. However, if the offer was accepted on a Friday and Buyer 2 makes their larger, Gazumping offer on the following Monday, no expenses will have been incurred, just a few days of hope and excitement for buying their new house.
- How much more the second offer is than the first offer. For example, if in our situation above Buyer 1 had only offered £425,000, meaning £25,000 less than the asking price, and refused to offer any more, with the Seller reluctantly agreeing to sell because they were desperate to move, then the Seller may not feel any remorse at all in accepting the Gazumping offer.
Gazumping In The UK
This article relates to Gazumping in the property market in England & Wales. Scotland has far more sensible property laws which make it much harder and more expensive for either the Seller or Buyer to pull out of the transaction once they have agreed a sale price.
If you would like any help from a solicitor either as a potential buyer or solicitor, speaking with one of our specialist conveyancing solicitors is a good thing to do sooner rather than later.