Data over the last two years reveals gazumping rates are increasing across Britain along with rising market values. Only 13 percent of buyers were gazumped in 2015, yet 36 percent have already been stung so far this year.
Gazumping refers to the act of a seller accepting a higher bid which is offered after a bid has already been accepted and the original buyer is, therefore, gazumped from the sale.
According to Peter Wetherell, CEO of Wetherell, gazumping often happens when properties are in extremely high demand. For example, an exclusive, designer property in an ideal location, of superior quality is likely to receive many offers, and the seller may be tempted by higher offers after they have already accepted one. It could also happen to more affordable properties – if a starter home or student pad is located ideally for a new family or student and is extremely affordable to suit the buyer’s needs, the seller can expect many offers.
He goes on to state that although gazumping can be disappointing and frustrating, it is a legal and a growing element of the UK house buying process. In order to avoid being hit, buyers must act quickly to complete the sale.
London buyers are hit the hardest
The last 18 months have presented the UK with political and economic uncertainty, which has led to a decrease in stock on the real estate market, as people are hesitant to sell at this time, yet demand and house prices are rising; this has also led to more bidding wars along the way.
A substantial 35 percent of buyers have been gazumped in London alone since 2015, with the South East in second place at 16 percent, which is over half the rate in London. London and the South East have some of the most in demand properties in the UK and are home to some of the most expensive properties too, so it is not surprising that gazumping rates are much higher here. The average house value in London is currently £481,345, and in the South East is £315,807, both of which are greater than the national average of £220,084.
The North West has the third highest rates of gazumping, but at only nine percent, almost a quarter of rates in London. The West Midlands is at seven percent, followed by Yorkshire at six percent. However, each of these regions has a much lower market value average than the South.
The least affected area, which is perhaps expected due to it commonly thought that gazumping is illegal here, is Scotland. Only one percent of buyers have been gazumped in Scotland since 2015, and this is because Scottish law and real estate practices are different than in the rest of the UK. When a seller accepts an offer in writing it is legally binding, this is not to say that the seller cannot then accept a higher offer later on, but a solicitor bound by Scottish law would not be able to sell the property as it is a means of misconduct. The seller would need to find a solicitor in England, and so the bid would have to be exceptionally higher for the seller to have two lots of fees (as the first solicitor would still require payment for the work already carried out), potentially a second valuation, and the hassle.
It is apparent from these figures that potential buyers are generally at higher risk of being gazumped in areas with inflated property values and fierce demand.
What can you do to decrease the chance of being gazumped?
Buyers can put actions into place to avoid feeling the sting of a higher bidder coming around the corner. Typically, it’s all about the speed of the sale. A cash buyer, for example, will be able to complete a purchase much quicker than one who needs to secure a mortgage. However, not everyone has the cash readily available to buy a property and, therefore, the best route here is to ensure a mortgage has been agreed in principle before viewing properties so an offer can be made immediately in the knowledge that a mortgage is almost certainly approved. Upon having an offer accepted, a mortgage buyer should get the paperwork for the application completed as soon as possible.
Other points to consider are the offer itself and existing property owned by the purchaser which needs to be sold first. If you make an unrealistic offer, even though the seller may accept it, they will most likely also see it as unrealistic and accept the next best offer that comes along. In addition to this, if you have property to sell before the purchase can be fully completed, significant delays and chains can be caused, and some sellers will not wait around, a higher bidder could come along any second.
If all else fails, don’t underestimate the power of a good rapport. People are usually well connected to their properties and have many memories in their home; this means they may be more likely to decline a higher offer once they’ve accepted yours if they know you and your family will care for the property as they did. The old saying ‘people buy into people’ stands firm in the property buying process too.