Categories
What is Gazumping? 5 Ways to Avoid It
Being gazumped when buying a house is more than just frustrating - it can be financially and emotionally devastating. The strange, almost comic-sounding word ‘gazump’ is believed to come from the Yiddish ‘gezumph’, meaning to be cheated or overcharged - but there’s nothing funny about losing your dream home at the last minute.
Industry surveys suggest that more than a third of homebuyers experience gazumping, often losing over £2,000 in wasted fees. Given the financial and emotional impact, it’s no surprise that many wonder why it remains legal in England, Wales, and Northern Ireland. While attempts were made in the 1970s to ban it, only Scotland has successfully introduced regulations to prevent the practice.
So, how can you protect yourself from this increasingly common problem? At Clifton Private Finance, we have practical solutions that can help.
What is Gazumping, and When Does It Happen?
Gazumping is when the seller accepts a better offer on the house than one you’ve already made, after yours is accepted and often during the time you’re undertaking surveys and other preparations.
It’s a last minute ‘oh sorry, we decided to go with these other people because they offered more than you’ that leads to you either being forced to up your offer and potentially enter a bidding war that you cannot guarantee winning, or simply having to suck up your losses and walk away.
The timeline of gazumping vulnerability is:
- When making early mortgage application and getting an AIP (Agreement in Principle) - You can’t be gazumped at this stage as you don’t even have a house to consider.
- While you’re looking for properties to buy - Without a clear property in mind, you are just in the early stages.
- Once you’ve found a property and made an offer - You’ve made your first offer and can be outbid. Technically, this isn’t gazumping because the seller hasn’t accepted your offer and is still considering their options.
- Once the offer is accepted - The stage where your formal offer is agreed by the buyer is known as ‘Offer Accepted (Subject to Contract)’. This is where the highest risk of gazumping is present. The seller can legally choose another buyer if a better offer comes in after they’ve said yes to yours.
- While you are conducting surveys and your lender is making valuations - This is where the most risk lies. You have paid out for a surveyor and lenders fees, but you can still be gazumped, with the seller in their rights to choose a higher offer.
- After draft contracts have been exchanged between solicitors - Gazumping is still possible (and even more costly) at this stage; however, it is less common.
- Once the contracts are signed, exchanged, and the deposit has been paid - You’re almost there! The sale is legally binding and if the seller pulls out at this point they will face financial penalties.
- When completed and the keys are handed over - The sale is finalised and you’re all done. Congratulations, you officially own the property!
Why Does Gazumping Occur? 4 Scenarios
Gazumping feels incredibly unfair and as if the seller has no morals or understanding of the pain they cause, but the truth is that gazumping can happen for a number of reasons, many of which are not unreasonable.
There’s a higher offer
This is the most obvious reason. If someone comes along and offers £10,000 more than the current buyer, they’d be out of their mind not to take it, right? Sadly, that’s the basic truth. The seller (usually) has no ties to you in any way, so what makes one stranger’s situation more important than another’s? Most gazumping is purely for financial gain from the outlook that ‘business is business’.
Faster sale
Property sales are often part of a chain, and sellers are also buyers, looking to make a step up. Accepting a solid and reliable sale from someone who is a cash buyer (i.e. they’re not reliant on a mortgage application) or is chain-free (so unlikely to have unexpected delays outside of their control) is more appealing for the seller so they’re not gazumped in turn.
Personal reasons
No seller is ever obligated to accept an offer from a buyer if they find they simply don’t want to. For example, gazumping may occur because the seller would rather their home went to a family than a couple, single person, or investor. Seller’s don’t have to give a reason, no matter how frustrating that might be and they might just decide you’re not the right fit for them.
Buyer delays
It may be that you’re dragging your feet too much. Sellers can easily lose their trust in buyers and worry that the buyer is going to pull out or that something is going on behind the scenes that will make the deal crumble. When another offer comes along when you’re the one causing delays, the seller is completely justified in taking it.
The Estate Agent’s Role in Gazumping
One question that’s often asked is: Did the estate agent do this to me? Are estate agents allowed to encourage gazumping?
It’s a bit of a grey area though - there’s a very fine line between ‘informing’ the seller about new offers and actively encouraging them to take a one over yours. They may also subtly hint that if the seller waits a while they could get a better price, or contact other competing buyers to let them know that other offers are coming in.
Some tactics that estate agents use that fall into this grey area include:
- Calling back other interested buyers after yours is accepted - ‘Hi, just checking in to see if you’d like to make another better offer…’. Plus, if the seller has given them permission (and most sellers do), then they can even directly state what your offer is.
- Delaying the process - It’s not too hard to spend just a little longer submitting something or following up a call to create an extra day or two for another prospective buyer to put in an offer.
- Putting pressure on you to up your own offer or speed up - ‘Hi, I just wanted you to know there’s a lot of interest, so the seller is currently keeping options open for a few days…’. This only needs a little truth to not technically fall under ‘misleading the buyer’.
The following is absolutely banned, however, and should be reported:
- Telling a buyer than an offer has been accepted when it hasn’t (either theirs or someone else’s).
- Failing to pass an offer to the seller (either yours or another potential buyer’s).
- Lying about the number or size of rival offers to artificially drive up the price (this is called ‘ghost gazumping’).
- Disclosing the exact amount of your offer to any third-party without the seller’s permission (this can be done if agreed with the seller).
Understanding the estate agent’s role can help you navigate the complexities of gazumping without being caught out.
What Can You Do to Avoid Gazumping? 5 Methods
Once you understand why gazumping might happen and can see it from the perspective of the seller, it’s a lot easier to plan to avoid it.
Move Quickly
The most effective way you can protect yourself from gazumping is to limit the period where gazumping is possible. Ultimately this means exchanging contracts as quickly as possible after you make the offer.
Mortgages, while the perfect long-term financing solution for a house or flat purchase, are not known for being fast. There are many steps to obtaining a mortgage that can (and will) slow the process down and possibly drag on.
Mortgages require comprehensive due diligence by the lender including a deep dive into your finances, full valuation, and assessment of the property’s legal position. While this can take only a few weeks, it can also drag on into months, extending the period between you making the decision that yes, this is the home you want, and the money becoming available for that essential contract signing.
Bridging loan applications are based on a clear exit strategy - this is a watertight plan for how the loan will be repaid in full after a short time. In the case of buying a property, the mortgage forms the exit strategy, making bridging loans lower risk and easy to obtain.
The way it works is:
- You make the offer on the property.
- You immediately organise your surveyor.
- You put forward your formal full mortgage application.
- You apply for a full bridging loan that documents the mortgage as the exit strategy, backed up by your AIP, surveyor report, and application finance details.
- The bridging loan is approved (often within 24-48 hours).
- You complete the property purchase using the bridging loan as payment.
- You are now largely free of any threat of being gazumped and can move in!
- You repay the bridging loan once the mortgage is fully approved.
Our specialist mortgage and bridging loan team at Clifton Private Finance are here to help you through the process from beginning to end, helping you find a specialist bridging loan provider who will offer you the lowest rates and fastest application process.
To see how much it could cost and what the option would look like for you, try our free calculator:
Get started with our calculator
Recent Bridging Loan Case Studies
Negotiate a Lock-In or Exclusivity Agreement with the Seller
Lock-in agreements prevent the seller from talking to other buyers for an agreed period, specifically designed to counteract gazumping. They’re an agreement signed by both parties that states that the seller won’t negotiate other offers for a few weeks in exchange for the buyer (you) working rapidly to complete the deal.
An exclusivity agreement is an upgraded version of a lock-in agreement that includes pre-arranged financial penalties should either party renege on the deal.
Ultimately, while it’s worth mentioning these agreements as a possible concept, they’re not something we at Clifton Private Finance often see successfully applied.
Ask the Seller to Take the Property Off the Market
This is literally asking the seller to do you a favour and can be seen as an informal version of a lock-in agreement. If you build a strong rapport with the seller, there’s no harm in asking, but it shouldn’t be expected and will often be rejected.
Sadly, even asking for this concession from the seller can present you as more desperate, sometimes increasing the chance that they will leverage their stronger position to convince you to up your offer.
We advise caution when approaching a seller to ask for a favour that relies on their kindness and ultimately benefits only you.
Building a Relationship with the Seller
Working on your relationship with the seller to simply be more likeable is a strong tactic. While it doesn’t come with any guarantees, sellers are more likely to feel ethically bound to avoid gazumping if they feel a personal connection with your or your circumstances.
Of course, building a relationship in this way offers no guarantees and can go wrong if approached badly, or if you try to directly leverage any goodwill you’ve developed, but it can give you an edge in a gazumping situation.
Home Buyers Protection Insurance
Home buyers protection insurance won’t stop you from losing your dream home if you get gazumped but it can limit the financial impact if the purchase falls through.
This insurance will typically cover conveyancing fees, survey costs, and mortgage arrangement fees. Speak to Clifton Private Finance’s mortgage team to discuss this useful financial protection to learn more.
What to Do If You’re Gazumped
What if despite your best efforts, you get that email or phone call that says your offer has been gazumped? Is there anything you can do? Well, yes:
- Financially negotiate your way to the top again - Nine times out of ten it’s just a matter of money. If you are able and willing to enter into a bit of a bidding war, then you may be able to counter the offer and gazump the gazumper.
- Prove you’re a safer or better buyer - If you can’t meet the bid, perhaps you can lean on some of the other factors that come into play. Can you convince them that you’re more likely to complete the deal? Perhaps you’ve already done the survey and can point out that you’re that much closer to being ready. Maybe it’s worth tugging on the heartstrings and leaning more directly on that relationship you built up.
- Use a bridging loan to pull the rug from other buyers - Coming back with the ability to make the deal immediately can often swing the pendulum right back to your side. Many buyers will look at slightly less money that happens right now (or within the next 48 hours) as being much better than a potential promise of more money that’s actually not guaranteed and may take weeks. Bridging loans give you that power.
- Walk away - Let’s be honest, you may think it’s your dream home today, but there are always other properties and other opportunities, and next week you might find something even better. Sometimes, it really is just better to know when to cut your losses and just walk away, learning from the experience and simply being better prepared for next time.
Using Bridging Loans to Avoid Gazumping with Clifton Private Finance
You can build a great friendship with your seller, lean on their ethics and morality, or just pray that it’ll all work out for you, but let’s be honest, when it comes to buying a property, closing that deal quickly and efficiently is the absolute solution to gazumping.
