Gazumping is when a seller that has agreed on terms to sell their property to you and then, sometime after, changes their mind. This is usually because they’ve received a better offer or, their circumstances have changed.
It can be an expensive waste of time if you have already employed professionals to act in the purchase and you might find yourself with some hefty bills to pay. And you’ve lost your dream home too!
There are a few ways to help reduce the risks of being gazumped. Here are some ideas;
- Be prepared! In an ideal world, you will want to be able to offer the seller confidence that you can ‘perform’ if they agree to your offer. This will mean you should have your ‘mortgage offer in principle’ from your mortgage provider. This means that much of the technical work has been done and you have been approved by the lender, subject to them checking that what you have stated on the mortgage application was accurate. This should give the seller the confidence to stick with you.
- Be communicative! Don’t disappear after solicitors have been instructed. This is exactly when you should be making sure that you are constantly speaking with the seller. Keep them up-to-date on your progress and if there is a problem, you can at least, dress it up to be as positive as possible. Better to have some degree of trust between you and the seller. Even if they do change their mind, you might at least save money by catching onto their doubts sooner rather than later!
- Be prudent! You can buy Home Buyers Insurance to help mitigate the costs incurred when a sale, subject to contract, falls through.
- Be cheeky! If you have bought subject to contract, which all sales are, at first, there is nothing to stop you asking the seller to have the sale board taken down and for him to put sold subject to contract on the details in the agent’s window. In effect, you are asking that he stops marketing the property. It’s probably reasonable to ask this, as long as you don’t drag your feet in the coming weeks, but it’s not unreasonable for the seller to resist either. After all, you can walk away too, leaving him with no other interest.
- Be formal! A more formal way to make sure a seller stops marketing the property is to ask that he signs a ‘lock-out’ agreement. This is a side agreement that prohibits the seller selling to or negotiating with anyone else for an agreed period of time. The downside to this is two-fold. First, the agreement with take time and money to draft and secondly, the seller will probably ask for a non-returnable deposit of some sort in return for his taking the property from the market.
- Be fast! The best way to avoid gazumping is to do what you said you were going to do, quickly. In most cases, this means having the mortgage in place and any cash you need ready in the bank. If you have yet to sell your own property, you are unlikely to be able to do this. However, some people take an additional, short-term loan, called a bridging loan which enables them to buy quickly, before they’ve sold their other home. Remember, you now have at least two loans to service! So make sure you can afford to do this. Also, be realistic about how much you are likely to get on your house sale - or things can get expensive fast!
- Finally, if your seller does accept another offer, be prepared to match or better it, but only if it is the home of your dreams!
For more details on how we can help you to be best prepared and move fast in the purchase of your dream home, contact Mortgage Required for a chat on 01628 507477.
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