The purchase of a new home is a major milestone for many buyers and can be an expensive process with survey fees, solicitors fees, mortgage application and conveyancing all part of the buying experience. However, what happens when another buyer outbids you on your chosen property before you have even had a chance to sign the contracts and close the deal? This is known as being gazumped.
While there is no guarantee you will never be gazumped, there are some steps you can take to minimise the risk of this occurring. One way is to instruct your solicitors, surveyors and lender to get things sorted as soon as possible after you make an offer. This will help to speed up the sales progression and reduce the amount of time that could be left open for someone else to step in with a higher offer.
It is also advisable to speak to your estate agent and seller about their policy on gazumping. Often, if you can convince them to stop advertising the property once they have accepted your offer, this will limit the likelihood of another buyer stepping in with an increased bid. You can also ask your seller to sign an exclusivity agreement with you. While this can be a cost, it can be worth the peace of mind of knowing that you won’t lose out on your dream property to someone else. For advice from Gloucester Estate Agents, go to TGRES
Despite the best efforts of both you and your estate agent, it’s important to remember that it is the vendor’s decision who will decide whether to accept an additional offer. This is especially true if they are relying on other sales in the chain to facilitate their own. This can be a frustrating time for anyone involved but it is important to remember that their main priority is to complete the sale of their property and get the money in their bank.
The quickest way to prevent being gazumped is to be chain free when you make your offer. If you are unable to sell your current property in time, it may be wise to consider moving into rented accommodation and then looking for a new home that is suitable to accommodate your family. This will give you a huge advantage over those who are not chain free and will significantly reduce the likelihood of being gazumped.
While being gazumped is not completely avoidable, it’s a good idea to keep these pointers in mind and be prepared to move quickly once you have found your dream property. If you can’t, you can always take out an insurance policy to cover the cost of having to start your property search all over again!
Protecting yourself if a purchase collapses
Gazumping is one of several reasons a house purchase can fall through, and by then buyers have often spent heavily on surveys, mortgage fees and conveyancing. If the sale does not complete, that money is lost. Homebuyers’ protection insurance is designed to cover these costs.
Policies usually cover the survey cost, conveyancing fees up to an agreed limit, mortgage arrangement and lender fees up to a limit, and gazumping. Cover lasts for a set number of days. It typically applies when the seller withdraws the property, when the buyer is made compulsorily redundant or relocated by their employer, when the valuation comes in below 90 per cent of the agreed price, when the lender requires renovation work, or when the property is badly damaged before completion.
It is another cost to add to the list, but it can bring real peace of mind. Shop around for the best price and read the terms carefully to be sure the policy covers the problems you are most worried about.
Chains, competing buyers and protecting your costs
Gazumping is not the only reason a purchase can collapse. Being part of a chain lowers the chance of a smooth completion, because every extra buyer and seller is another point where problems or delays can occur, putting strain on an already fragile arrangement. Some sellers also accept offers from several buyers and send contracts to each of them, so the one who signs, returns the contract and pays the deposit fastest secures the property.
Because so many sales fall through, some buyers look at no sale no fee conveyancing. Under this arrangement, if the transaction does not complete, you are not invoiced for the legal work done on it, which can limit losses when money is tight.
It is rarely entirely free, though. There is usually a small upfront payment to cover the solicitor’s risk, and if later transactions also fail, you may be charged for the share of work completed before they did. Read the terms carefully so you know exactly what you would pay.