Communities Secretary, Sajid Javid, has announced the Government is launching a probe into ‘Gazumping’. They are calling for evidence from estate agents, solicitors and mortgage lenders over the next eight weeks in an attempt to make the house-buying process “cheaper, faster and less stressful”.
So, What is Guzumping?
Gazumping is the practice where people who have already put down an offer on a property are outbid by rival buyers.
In England and Wales, even though an offer has been accepted, a house purchase is not legally binding until contracts have been exchanged.
Gazumping rarely happens in Scotland, because the agreement is legally binding earlier in the process – as soon as seller’s solicitor provides a signed written acceptance of a buyer’s offer, which may be ‘subject to survey’.
When does gazumping occur?
About 25 per cent of house sales fall through after the offer has been made and before exchange and one reason for this is ‘gazumping’.
In the period leading up to exchange the seller – or buyer – can pull out of the sale with no financial repercussions.
The exchange of contracts doesn’t happen until all paperwork is in order: the survey has taken place, the mortgage arranged, searches conducted and legal documents completed.
This generally takes three months, depending on the number of people in the chain, how long it takes to have a survey done and how fast (or slow) the solicitor is.
In most cases gazumping happens because a higher offer has been made. However, it may also happen because a buyer is in a better position to move more quickly.