Gazumping has been a prevalent issue in the property market for some time. Where prices rise, gazumping tactics become commonplace.
Gazumping occurs where the seller of a property agrees to a deal with a buyer, but then accepts a higher offer before the original sale completes.
The initial buyer will be gazumped by a rival bidder. Often, gazumping takes place late in the process, as buyers swoop in at the last minute with a tempting offer.
The practice tends to be seen more in a sellers’ market. Where prices are high, demand will be too. This gives sellers the upper hand, as there will be no shortage of buyers.
We’ve been tracking gazumping practices in the marketplace since at least 2017, producing multiple research reports on the subject. Our latest survey from 2022 revealed 31% of people in England and Wales who had bought a property since 2012 said they had been gazumped at least once.
Meanwhile, 26% admitted to gazumping another buyer, and 47% would consider gazumping a rival bidder if it got them the property they wanted.
But, how common is gazumping in the current market? Well, in recent months, the dynamics shifted. In the 1st half of 2022, demand for property was high, giving sellers the upper hand. They had the luxury of holding out for handsome offers to roll in. Buyers had to worry about what is gazumping, and what are the dangers.
But as the autumn arrived, property prices came under pressure. Growth stalled, and demand waned. As a result, gazundering replaced gazumping as the dominant issue on the market’s mind.
This is the practice of attempting to renegotiate a lower price after an offer has been accepted. Again, this may take place late in the process, usually on the verge of exchange.
Why is gazumping not illegal?
You may view gazumping as an unfair, even unethical practice. People are not only likely asking themselves what is gazumping, but also why hasn’t it been outlawed?
Calls for it to be made illegal tend to pop up every now and again. But as it stands, the government hasn’t acted. In Scotland, gazumping has been outlawed, but it’s legal in England and Wales.
This has proven to be a key issue for property investors in these countries. Our research showed 79% of homebuyers would like to see gazumping outlawed in England and Wales. What’s more, 80% of respondents from our 2019 survey called for legal reform to clamp down on gazumping tactics.
But, as it stands, there is little evidence that reform is on the way. There are beneficiaries of gazumping, and so long as it results in better offers for sellers, change will likely be resisted.
Also, outside of buyers and sellers, there are other industry participants with vested interests in the status quo. Estate agents will be focused on what is gazumping’s impact on their bottom line.
The fees they charge are usually dependent on a property’s value. They can range between 0.9% and 3.6%, with an average of 1.42% including VAT, according to the HomeOwners Alliance. There are also commissions. Often, the more a home sells for, the bigger the profit for the estate agent.
Often, estate agents and other property websites list a home as “Sold STC”. This means an offer has been accepted, but the sale is still “subject to contracts” being exchanged. For gazumpers, seeing “Sold STC” may signal that it’s time to pounce.
With these elements in mind, it’s unlikely you’ll see much gazumping resistance from these key players. If these practices push prices up, many may turn a blind eye.
Should sellers accept a gazumping offer and can buyers avoid the damage?
If you’re the seller of a home, it’ll prove difficult to turn down higher bids. Even knowing they’re disadvantaging your counterparts in the market. But, in the current environment, higher bids may be relatively rare.
House prices across the UK are under pressure. Although, a few promising hotspots still remain. London, Malvern Hills, Crawley and Stevenage are just some of the areas bucking the trend and seeing prices rise. In these towns, gazumping may be likely.
For buyers, there are ways to avoid being gazumped by a rival or, if not, minimise the damage. When making an offer, you could make it clear that it’s subject to the property being taken off the market. You could request that no more viewings are conducted, and the online listing moved to “under offer”.
Where offers are accepted, you should follow up with all the parties involved. Especially solicitors and conveyancers. By making sure the necessary paperwork and due diligence is completed quickly, you can cut how much time your rivals have to swoop in and take advantage.
Source: Property Reporter
How much of an issue will gazumping be in the future and can specialist finance help?
Property investors would be wise to take note. While house prices may be subdued now, they’re unlikely to stay that way for long. Both the Office for Budget Responsibility and Savills, expect prices to rebound from 2025.
This will likely be a busy year for property. What is gazumping will be a question sat alongside countless other housing queries. Not only may gazumping ramp up again as prices rise, but stamp duty perks will also be withdrawn in 2025, while new EPC rules will come into play in 2028. There will be plenty of moving parts and deadlines to keep on top of over the coming years.
Fortunately, specialist finance can help with this. Where demand increases, be it from rising prices or changing legislation, speed will prove essential. You will need to be ahead of your competition, who will be trying to jump on the same opportunities you are.
Across our products, we can have funding issued in as little as three days. We can also tailor our loans to fit your requirements.
We understand the risk gazumping poses. We’ll act accordingly.