As the UK property market remains highly competitive, gazumping is becoming a common tactic from desperate buyers. This is due largely to the limited supply of homes compared with the high demand among buyers and investors. The practice of ‘gazumping’ is only adding to the complexity and competitiveness of the market.
- But what is gazumping?
- Why does it happen?
- How can fast bridging loans or commercial property loans can help tackle the issue?
1) What is gazumping?
Gazumping is when a seller agrees a deal for a property with one buyer, but then accepts a higher offer from another before the original sale completes. As a result, the initial buyer misses out on the property, forcing them back into the market.
In England and Wales, gazumping is legal. Even if the seller has accepted an offer, they are not legally bound to the agreement until there is an exchange of contracts between the two parties. Gazumping is therefore common in the English and Welsh housing markets.
Our recent research found that:
- 31% of homeowners have been gazumped by a rival bidder while trying to buy a property in the last decade
- 47% said they would consider gazumping a rival bidder if it meant getting the property they wanted
It’s not a surprise, then, to uncover that a vast majority of 79% said they would be in favour of the government outlawing it as they have in Scotland.
2) Why is gazumping so common?
Gazumping has become more common due to the contribution of several factors. MFS’s recent study among more than 500 homebuyers unearthed two important ones:
- Long property chains
Our survey found that, of those who’d lost a property to gazumping, 25% said it happened because they were stuck in a long property chain.
- Mortgage delays
However, 20% said the reason they had been gazumped was down to delays and waiting times in getting a mortgage.
This is a serious issue that requires attention. Indeed, gazumping can mean a prospective buyer loses money on surveyor and solicitor fees, with our research showing that almost a quarter (23%) of gazumped homebuyers lost money as a result. On average, it’s estimated that homebuyers lose £2,700 when a purchase falls through.
Source: Property Reporter
3) How can residential bridging loans help tackle the gazumping issue?
To minimise the risk of being subject to gazumping tactics, those planning to invest in a property in England or Wales must consider the lenders and financial products that offer financial solutions that can help. Speed and flexibility are key when completing a property purchase. That’s why these are at the heart of all our products here at MFS.
Many mortgage lenders take weeks, if not months, to review an application then issue the loan. These long waiting times increase the risk of a buyer getting gazumped. That’s why many investors, as well as some residential homebuyers, have turned to bridging loans or buy to let mortgages to avoid long property chains or unwanted delays. Looking for more information on overcoming property chains?
Once an investor or homebuyer has completed the purchase of their desired property using bridge lending products, they can then consider longer-term financial solutions. We also offer significant flexibility
- Assisting landlords
- Overseas investors
- Overcoming adverse credit
We aim to protect all manner of homebuyer from being gazumped. You can find out more about how we use specialist finance by reading our case studies.
With over 15 years’ experience as a specialist lender, MFS can issue bridging loans and products to any investor or homebuyer who needs to complete a deal quickly on a property. From the initial enquiry to the delivery of funds, we can complete deals in as little as three days.
To find out more about how MFS can protect homebuyers from ‘gazumping’ strategies, contact us today.