Approximately 28% of UK transactions fall through each year.* Of these 21% of buyers were gazumped – losing the property due to the vendor accepting a higher offer from another buyer.
Given there are about 1m annual transactions, gazumping accounts for nearly 59,000 transactions falling through.
Other reasons for failed transactions included:
• 27% where the seller decided not to sell their home
• 21% of buyers being unable to complete sales on their own homes
• 21% of buyers finding an alternative home to buy
Gazumping is more prevalent in a buoyant property market when vendors are in a strong position. It isn’t always about more money. Sometimes buyers can get caught in a protracted buying process which means the process can be more susceptible to things going wrong.
Given this is a scourge rearing its head again in 2020 and 2021….
What can you do to protect yourself from Gazumping?
- Be as ready as you can be at the outset, for example getting finances organised. Or ensuring you have the ‘right’ professional adviser for the type of transaction you are conducting. A process-driven online conveyancing house is not likely to be the best adviser for a Title split or an Options deal.
- Request a Lock-out agreement, if a vendor agrees to it. The benefit is it gives peace of mind on timeframes to the vendor as well as the buyer. The predictability means everyone can plan their lives around move dates, so the transaction is far less likely to fall through. The penalty is whatever the financial commitment has been agreed in the Agreement.
- Or Exchange early, say with 1% deposit to secure and lock in the deal
- Do your Due Diligence up front – researching the area and property as much as possible before waiting for a lawyer to check it e.g. buy the Title Deed from Land Registry to verify ownership, check historical pricing and check boundaries. Or asking for a management pack for leasehold properties.
- Go for speed of transaction – which gives less time for the transaction to falter
- Build vendor rapport so there is a human commitment and get the property taken off the market immediately. Strive wherever possible for a transparent transaction, so you are aware of every development in a timely fashion.
- Indemnity insurance or Homebuyer protection insurance can protect against wasted fees spent on surveyors and searches
- Buying at Auction can help address the gazumping because all the buyer’s information is provided up front and the accepted offer is binding.
There are different buying models in other countries
Scotland’s property buying process
Gazumping is rare in Scotland. Solicitors are bound by their professional body (Law Society of Scotland) which bans the practice of Gazumping and are often involved with the marketing and selling rather than just estate agents. Although gazumping can still occur with smaller boutique agents.
In Scotland a Home Report is provided by the Vendor, a bit like preparing the sale for auction in England and Wales. It contains a floorplan, an EPC (up to 6 month’s old), a Gas Safety Certificate, a Survey by a RICs-qualified surveyor, as well as the Utility Providers.
The former Home Information Packs (HIPs) helped in England and Wales , providing EPCs and the Vendor’s questionnaire, but they fell into disrepute and only the EPCs have survived.
France’s Property Buying Process
In France, the 2 contract system also helps mitigate Gazumping – the deposit is paid on signing the ‘Compromis de Vente’ rather than awaiting the ‘Acte de Vente’ the Final Deed and transfer of Title . On the upside, the buyer’s deposit secures the property by contract, the vendor is not allowed to accept any other offer, at that stage. However there are downsides for the buyer, if the buyer pulls out without adequate cause, for example if the survey reveals serious unacceptable faults, the buyer may forfeit the deposit.
Generally it is easier for Homebuyers to get caught out more than Investors, given they are buying more based on emotion and rather than the numbers an experienced investor is more likely to do.
Inspired by a Clubhouse conversation in Toyin Ayandare’s Room 7th May 2021
N.B. *Sprift, A Which? survey of 2,000 homebuyers in February 2016,
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Disclaimer: Property Venture® is not a tax adviser but has outlined information in layman’s terms to enable top line comparisons, nor is it offering advice.
With regard to in-country legislation, letting licences and taxation laws, then you must take appropriate legal or taxation advice during your purchase process, at which time your solicitor or advisor will discuss with you up-to-date legislation and costsTags: France, gazumping, investment property, Scotland, UK investment