Call for gazumping to be legally banned

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As if buying a house in itself isn’t frustrating enough, particularly in times when few houses are available and buyers are being incentivised by government schemes, gazumping is back in the ring.

Being gazumped is arguably one of the most infuriating experiences that can happen when purchasing property. Gazumping occurs when a prospective purchaser has an offer accepted on the property they want to purchase and the sale looks set to go through – until another bidder makes a higher offer.

It is enormously disappointing and can be expensive, particularly if the buyer has already sold their own home or given notice on a rental property, paid for a property survey and conveyancing costs, or committed to new schools or jobs, not to mention the domino effect of the disruption caused to other buyers and sellers in the chain.

Gazumping is not illegal, although it could certainly be considered a shady practice. It was a common occurrence during the housing booms of the Nineties and Noughties but diminished after the financial crisis of 2008.

The housing market is back on a high and several factors are responsible. These include the small number of properties available, the success of government schemes including help to buy, low deposit mortgages for first time buyers, the urge to buy homes and second homes in the country side and coast, and low interest rates. The demand for houses remains high and the number of people bidding on any one property has increased, resulting in purchasers being gazumped.

Another major factor of gazumping in cities is the influx of foreign money, with overseas buyers prepared to pay a premium and act quickly to secure a property, but gazumping is not restricted to Central London. It happens across the UK, including Scotland and even in the self-governing British Crown dependency of the Isle of Man, where the experience of one buyer hoping to secure a property has led to a petition for a ban on gazumping.

Ten days after having his offer accepted for the purchase of a six-bedroomed property on the island, Richard Cassidy was told that the seller had withdrawn their acceptance in exchange for a cash purchase by another buyer. He is now living in temporary accommodation with his wife and four children.

He described his experience as ‘devastating’ and said that: “others should not have to endure, not only the financial losses but the almost irreparable emotional damage on families.”

Mr Cassidy said that other people had experienced similar problems on the Isle of Man, but he believes the onus of responsibility should lie with estate agents and ‘the advocates’.

Jason Moorhouse, representing the Isle of Man constituency of Arbory, Castletown and Malew, said he was astounded that gazumping had been allowed “so far into the process” of Mr Cassidy’s house purchase.

Sadly, previous petitions have been unsuccessful but in 2018, the English government pledged to crack down on gazumping and required estate agents to hold a professional qualification and to be transparent about the fees they receive for referring clients to solicitors, surveyors and mortgage brokers. One of the measures to make the house buying system easier, faster and more transparent included encouraging the use of voluntary reservation agreements to help prevent sales falling through and crack down on gazumping.

Despite all this, gazumping remains legal in England, but there are some things you can do that can help avoid it costing you money.

Home Buyer Protection Insurance can protect you if the sale falls through because of the actions of the seller, and you can claim back much of the costs of conveyancing, surveys and other fees that you may already have paid.

Before making an offer on a property, make sure you have a Mortgage Agreement in Principle and have engaged a solicitor who can prepare much of the necessary documentation in advance and help speed up the property buying process. Once the contracts are exchanged the agreement is legally binding, so being able to move quickly will help.

Make sure the seller is willing to remove the property listing and take it off the market once they have accepted your offer. This will make gazumping much less likely.

Keep the seller informed of what is happening your end. Buying a house takes time and estate agents and solicitors tend to avoid contacting clients unnecessarily. It can sometimes feel as though nothing is happening, so take the guesswork out of the equation by telling your seller what is going at on your end and remind them that you are actively seeking to buy the property.

Consider taking out a lock out agreement, which is a contract seller and buyer, giving the buyer the exclusive right to buy the property within a limited period of time. This may appeal to sellers who have previously lost a sale or who want to move quickly.

Don’t assume the estate agent is trying to bump up their fee by encouraging gazumping. They have a legal duty to pass on an offer so the seller is the person ultimately responsible for gazumping. Of course, an unscrupulous agent or seller might invent a higher offer to ‘encourage’ you to increase your offer, but you might ask to see evidence of this in writing before upping your own offer.

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