23rd May, 2016
Government ministers are said to currently be looking at cracking down on buyers and sellers who withdraw from a property deal in the final hour, or who attempt to gazump or gazunder each other. As it stands, the UK system allows either party to pull out at the last minute, which actually encourages this discourteous behaviour. No sale is finalised until the last minute, meaning buyers and sellers are at the mercy of others in the chain.
Gazundering and gazumping are examples of poor buying and selling etiquette, that tend to be guided by greed. For anyone who has been on the receiving end, it makes the process of moving house significantly more stressful.
Gazumping occurs when a seller has already accepted one buyer’s offer but then chooses to accept a higher offer from a different buyer. Without signed papers neither party are obligated, so this can happen at any time leading up to the exchange of contracts. This can be devastating news for the buyer. They lose out on the property in spite of the money they have spent on surveys and solicitors fees, which can add up to thousands of pounds.
Gazundering is more commonplace in a buyer’s market. This is an underhand tactic whereby the buyer holds out until the very last minute when everyone in the chain is ready to exchange and then reduces their offer. The seller is within their rights to refuse, but by this stage in the game, schools and jobs have been secured, moving day logistics planned and a lot of money has already been spent. If the seller refuses at this point, it is likely that the whole chain would collapse. Buyers who gazunder do so safe in the knowledge that the seller is probably also in a chain and a refusal to accept the lower offer will almost certainly mean that they will lose out on their new home.
To avoid these issues, the government are considering making house purchases legally binding at a much earlier stage in the process, for example when an offer is accepted. A buyer or seller who pulls out afterwards would have to pay the other party’s costs.
In the March Budget the Government said: “We will publish a call for evidence on how to make the process better value for money and more consumer friendly.” It now appears that the Government is gearing up to do so, through a consultation on quickening and improving the home buying process.
In Scotland, gazumping and gazundering cannot happen because deals are fixed once missives (legally binding letters relating to the house sale) are exchanged. Mark Hayward, managing director of the National Association of Estate Agents stated on Radio 5 Live that other alternatives include having a pre-contract agreement or taking a deposit from the buyer, but warned these were unlikely to be popular solutions. He also warned that the Scottish system is by not flawless.
He said: “The Scottish system is sometimes referred to as the ideal system, but if you speak to people in Scotland they may disagree. The onus is on the purchaser who has to have carried out all the checks before making an offer on the off-chance that it would get accepted. We perhaps need a hybrid system. In France you have a ten-day cooling-off period after an offer is accepted.”
Hayward added that the whole ‘100-year-old’ legal process of buying a property needed an overhaul.
While discussions on a potential overhaul of the property buying and selling process is ongoing, there are ways you can help to protect yourself from being gazumped or gazundered. If you’re worried about being gazumped you can choose to sign an agreement that details an exclusivity period with the seller. You could also consider taking out an insurance policy that means you can recover fees incurred due to being gazumped.
The best way to avoid being gazumped is to keep the legal work and conveyancing moving along at a decent pace. As soon as your offer has been accepted, request that the property is taken off the market and that a ‘sold’ or ‘under offer’ sign goes up. And it’s absolutely key that you keep in touch with the seller’s agent. If the seller is confident that the sale is progressing nicely they are less likely to be swayed by interest from other buyers.
To avoid being gazundered, the first thing to do is to ensure that your asking price is realistic and reasonable. A realistic price will lead to a faster sale and you’ll have no need to dramatically lower the price in a desperate bid to attract buyers. Crucially, be up front from the outset about any problems with the property. This will make it difficult for buyers to negotiate on these terms at a later stage.
Article source: nethouseprices.com, www.ratedpeople.com
Image source: harcourts.com.au
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