Buying a house – All about Gazumping & What You Need to Know
Gazumping ? – Have you ever been excited to purchase a property, did all your research, had a verbal offer accepted from the agent and perhaps even worked on the mortgage arrangement and then suddenly you are informed that the seller has accepted a better offer from another seller? You have been gazumped.
If you have faced this situation or even if you are new in the market, this article will explain to you everything which is related to gazumping.
Legality of Gazumping
In England and Wales, gazumping is perfectly legal in the property business since the agreement for property buying or selling only becomes legally binding once the contracts are exchanged and signed. Till then, no party is liable for any verbal agreement made.
It is common to have a delay of several weeks between the verbal agreement between buyer and seller of the property and the actual agreement to be signed due to various factors like property survey, conveyancer running the required searches and receiving mortgage offer. It is during this period that the seller can accede to another buyer’s offer. This usually happens for properties with higher demands which in turn increases that property’s worth. It is also possible that the seller chooses someone else’s offer in preference of yours, especially if you have delays at your end, like mortgage application and seller is keen to sell the property quickly.
How to Avoid Being Gazumped
While there is no fool-proof method to not to be gazumped, going in prepared and taking certain steps will lessen the probability of being gazumped.
While you may not be able to arrange everything arranged beforehand, you can make provisions for surveys, find surveyors in advance and other related elements of purchase to be able to complete these steps quicker.
Before looking for properties, you can get a ‘mortgage agreement in principle’, which is a conditional offer for you to receive a mortgage if certain conditions are met. This helps to quicken the mortgage process at the later stage.
Find a conveyancing solicitor ahead of time with whom you want to work with. Since any payments to the seller are to be made through a conveyance solicitor, it will help you as a buyer to get the money to them quicker.
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 are willing to do so particularly in flat housing market areas.
Get a preliminary (also known as lock-in, lock-out, or exclusivity) agreement from the seller. This obliges the seller to not get involved in the negotiations for the same property for a certain time period while you work on mortgage and other property buying requirements.
Lastly, you can also buy insurance which will cover your losses if you are gazumped.
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