How to deal with gazumping when buying a property

Gazumping is one of many challenges that buyers can face when buying property. But what is it? And is it legal? Here’s what you need to know.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

'For Sale' sign outside of a terraced house in the UK

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Finding an affordable home can seem like a daunting and, at times, impossible task. Not only do buyers need to save a large deposit, but the purchase process can involve many challenges. One of these challenges is gazumping. Here’s what you need to know.

[top_pitch]

What is gazumping?

Gazumping is a situation where a buyer makes an offer to buy a property and the seller accepts it. Then, just before the sale completes, the seller accepts a higher bid from another buyer.

Understandably, this can be profoundly disappointing and upsetting for buyers. They can lose a significant amount of money, especially if they’ve paid for services like surveys, conveyancing and mortgage arrangement fees.

Is gazumping legal?

The sad reality is that however much gazumping appears unfair or unjust, it’s legal as long as contracts haven’t been exchanged.

However, it can take several weeks before contracts are exchanged, leaving it to the buyer to find ways to avoid falling victim to gazumping.

[middle_pitch]

How can you protect yourself against gazumping?

GoodMove, a regulated property buying company, highlights three things buyers can do to protect themselves.

1. Ask the seller to take the property off the market

Sellers are under no obligation to take the property off the market, so as you make this request, know that you may need to prove that you’re a serious buyer. However, if a seller refuses to remove their property from the market, it’s a clear sign that they may yet be open to better offers.

2. Get a lock-in agreement

You could also get into a legally binding contract known as a lock-in agreement with your seller. Here, your seller agrees not to consider other buyers for a fixed period.

If you plan to get into such an agreement, it’s wise to seek the guidance of a conveyancing solicitor. The seller is under no obligation to accept or sign such an agreement.

If you’ve proven to the seller that you’re a serious buyer and they’re still unwilling to sign a lock-in agreement, there could be cause for concern.

3. Speed up the purchase process

If the purchase process takes too long, it creates room for another buyer to slide in and make a better offer. There are various things that you can do to quicken the purchase process:

  • Organise your finances – this involves making sure you can afford a mortgage and that no financial issues will delay the purchase process.
  • Find a conveyancing solicitor in advance – conveyancing solicitors ensure the buying process runs smoothly, all documents are correct and you’re protected from fraudulent deals. They also guide first-time buyers through their first purchase. Finding a conveyancing solicitor in advance could mean a fast and safe purchase process.
  • Find a surveyor in advance – it’s only wise to do your due diligence before committing to buying property. This means looking for a reputable property surveyor to inspect the property. Finding a surveyor in advance helps you avoid wasting time looking for one after you’ve made an offer.
  • Obtain a mortgage in principle – Getting a mortgage in principle shows sellers that you’re a serious buyer. It can make them feel more inclined to accept taking the property off the market or a lock-in agreement.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »