The term ‘gazumping’ may be one you have heard before, however, have no idea what it’s about. The word ‘Gazumping’ is used when the seller of the property you are interested in accepts another offer from someone else prior to the sale of the property to you is completed.
Derived from the Yiddish word ‘Gezump’, in which someone swindles or cheats someone out of something and was used back in the 1920s, ‘Gazumping’ has been related to house buying and was a common term in the 1970-80s.
Through our experience as a Mortgage Broker in Hull, we have had the opportunity to speak to customers regarding Gazumping. The most common topic surrounding gazumping is if it’s illegal. Unfortunately, Gazumping is legal despite how immoral it is.
This is a question that is in many people’s minds when they are going through the home buying process across England and Wales. Thoughts of why and how this practice can be legal despite its lack of morality are a common occurrence.
Gazumping is deemed a legal act because the deals you make between you and the seller aren’t legally binding until written contracts are exchanged by lawyers. Therefore, the seller has no obligation to hold onto the property. All the essentials are agreed upon verbally up until your deal is completed.
The concept of being gazumped can be very daunting amongst lots of home buyers especially with First Time Buyers in Hull, regardless of whether there is a chance of it happening. It comes with the possibility of losing your dream home. It’s an event that no one wants to happen, in particular, for those who are a part of a property chain.
Another factor that can affect home buyers being gazumped is the idea of them losing money over the event. Non-refundable expenses that come with the home buying process like property surveys, conveyancing fees and mortgage arrangements fees.
As mentioned, the agreement between both parties to buy or sell a property is not a legally binding one. It only becomes that when the lawyers undergo the exchanging of contracts.
It’s not as simple as it sounds. The process can come with long delays that are usually several weeks from having your offer accepted to the exchange of contract.
Usually, this certain time period can be where other prospective First Time Buyers in Hull may interfere in the process between you and the seller by making a more favourable offer on the property. This can happen through them speaking to an estate agent or by going directly to the seller.
The more favourable deal may have been a higher purchase price, a faster sale or a particular buyer who has no pressure from a property chain. Gazumping covers all these circumstances that the seller would prefer in the midst of your mortgage process.
One factor that could impact the chances of being Gazumped by a seller is whether the market is a buyers or sellers market.
For example, if the market is currently a sellers market, this means that the market is hot. This will involve a high demand, fewer properties, people wanting to buy and bidding wars between buyers that could make the prices rise. In this circumstance, Gazumping is more likely to take place because could come to the seller at a much higher price.
On the flip side, if the market is currently a buyers market, this will come with more houses than buyers, a seller may not be receiving as many offers. This means you have less chance of someone Gazumping you and means you have much more room to negotiate on price.
To keep up to date with the current state of the market, check out our Mortgage Market Updates video on Moneyman TV presented by the Moneyman himself, Malcolm Davidson.
One of the reasons why the delay may happen between the offer getting accepted and the exchange of contract between two parties could be due to needing a property survey carried out. This involves your conveyance undergoing the appropriate searches and you will receive your mortgage.
Below are some helpful ways to help increase your chance of advancing further to mortgage success and avoid being Gazumped.
There are plenty more mortgage tips out there that you can benefit from during your mortgage journey and increase your chances of getting a mortgage.
It’s best to start by asking them to remove the property from the open market, this can be stated in the mortgage offer. By doing this, you have made the property less visible to people, therefore, reducing any more offers being made which will then reduce your chances of being Gazumped.
This is more of a negotiating point so the seller doesn’t have to agree with this because there is no obligation. Despite this, we do find that sellers these days respect this request from a buyer. Even more so if they haven’t been receiving as many offers already.
Putting in place a lock-in agreement, where both sides put down a deposit towards their binding agreement can be another helpful thing to do. If any one party chose to withdraw or change the deal, the other party would take their deposit.
You may find that there are legal fees in this circumstance which can make it a costly decision. However, you may feel that having this set up is worth the money and provide security during your mortgage process.
Another option is to look at the potential insurance products that could protect you against the prospect of Gazumping. This will work by the policy being paid out in the event of being Gazumped which, in turn, will reduce the risk of losing money from the fees you have potentially paid in the process.
Even though Gazumping is never guaranteed to be prevented, there are a plethora of ways you can protect yourself as a buyer from being Gazumped. With our open and honest Mortgage Advice in Hull, we may be able to provide the help and support you need.
Here at Hullmoneyman, we strive in providing a fast & friendly service with the goal of getting you through the mortgage process. This is beneficial if you are a buyer looking for a speedier experience through your mortgage journey.
Furthermore, our expert team are able to get a mortgage agreement in principle sorted for you usually within 24 hours of your free mortgage appointment.
Having this AIP with you can demonstrate to the seller that you are in a serious position to proceed and give them the confidence in your getting a mortgage. This can make you stand out from other buyers who may provide a better deal but cannot confirm if they are eligible for a mortgage.
Book your free mortgage appointment today and see how our helpful team can help on your mortgage journey as a First Time Buyer in Hull.