Gazumping is a term used when a seller accepts an offer from someone, only to later on in the process accept a higher offer from an alternative bidder. It’s a term most commonly referred to during the negotiation period of a property sale, which can result in the original bidder being in a difficult situation. Gazumping changes the victims situation from believing they have landed their desired property to starting the process back at square one. Not only does it cause annoyance to them, it can also have negative financial implications. As they have made an agreement with the seller to buy the property, they may have spent money on solicitors to write out contracts, surveyors to look at the property, and possibly stopped pursuing other properties they were interested in. Although frowned upon, gazumping is legal up to when contracts have been exchanged, and is most common in England and Ireland.
When gazumping, a seller disregards a mutual agreement the bidder and themselves previously had so they can receive a higher amount for the property.
Unfortunately there is no way to guarantee you will not be gazumped, although there are certainly ways to minimise the chances of it happening. The main way to prevent being gazumped is simply by being pro-active. Gazumping can often happen when the buyer is prolonging any part of the transaction. Once the seller has accepted the bid you should encourage your solicitor to get contracts exchanged and signed, call up the seller confirming everything is still in place and request for the property to be taken off the market (if not already done so).
As repossessed and BMV properties offer some of the best deals going in the property market, it sometimes means the process itself can be more challenging. Unfortunately due to the context of how the repossessed or BMV properties are sold, gazumping is more likely to happen when bidding on them compared to regular properties. BMV sales often happen when the seller has to move the property on quickly but still wants the highest amount of money they can get for it, so there is little sentiment during this period. As for repossession, the banks are legally obliged to regain as much money a possible on the property they have just repossessed, therefore they are entirely motivated to get the highest bid possible. If this results in them knowingly causing annoyance to an interested party, it will not put them off gazumping. At times they can still even advertise the property after accepting one offer, in hope of getting a higher amount from another bidder. Considering this, if you are buying a repossession it’s vital to move fast until the contracts are signed.
Next page: 6.1 The Next Steps
