What is gazumping and gazundering?

The world of residential mortgages and house purchases is awash with jargon and technical terms, but there are two that you might come across – especially when it comes to buying or selling a house. These are gazumping and gazundering – but what are these strange terms and why exactly do they send a cold chill of fear down the spine of those who know what they mean?

Congratulations! You’ve found your perfect home and made an offer that has been accepted by the seller. Time to start shopping for sofas and fridge freezers then? Alas no. There are many pitfalls between your offer being accepted and the exchange of contracts – and gazumping is one of them.

Gazumping is the popular term for when a seller accepts your offer but then rejects it before the exchange of contracts in order to accept an offer (typically a higher offer) from another buyer.

Gazumping can also occur if there has been a delay in proceeding with the sale. For example, if you make an offer but there are significant hold-ups (such a delay with your solicitor or in arranging the mortgage), then a buyer can reject your offer (even after accepting it) and instead choose to go with another buyer who is ready to move more quickly.

For many people who have set their hearts on a property it can be a crushing disappointment, forcing them to either start their property search all over again or to increase their own bid to compete with the new buyer.

No. While there has been some talk of legislating against the practice of gazumping, it is not illegal – meaning you have no comeback against the seller for any losses you may have incurred – such as valuation fees, legal expenses, etc. while you were waiting for contracts to be signed and exchanged.

If you are in the process of buying a home (or other property) then it pays to remember that any sale is ‘subject to contract’. Essentially, this means the sale is only agreed ‘in principle’ and that both parties are not locked in until contracts have been signed and exchanged.

• Be ready – Make sure that you are as well placed as possible before making any offers. This means having a mortgage agreement in principle from your lender, as well as having a solicitor ready and all the documentation you need. The longer you keep a seller waiting, the higher the risk that they will get fed up and go elsewhere.
• Act fast – Speed is the key here. The sooner you can get contracts signed and exchanged then the nearer you are to being home and dry. Make sure that your solicitor, conveyancer and mortgage broker (if you are using one) are progressing things at an acceptable rate.
• Make sure the property is off the market – A property that is still on the market is always in danger of being snapped up by someone else. Make it a condition of your offer that the sellers take the property off the market – thereby reducing the odds that someone is going to swing in at the eleventh hour and gazump you.
• Be careful in your choice of seller – Try to form a positive relationship with the seller. Someone who is genuinely pleased you are buying the home they have loved is much less likely to accept a higher offer. A seller who seems unusually pushy or overeager to get the deal done (for whatever reason) should be considered a gazumping risk.
• Can I have that in writing? If the seller’s estate agency calls to say that they received (or even accepted) a higher offer, then you are perfectly within your rights to ask for proof of the higher offer in writing.
• Don’t panic! Most importantly, stay calm. Don’t immediately jump in with a higher counteroffer – take your time and consider things carefully before getting into a bidding war. Be prepared to let the property go if you genuinely feel that you are
  being treated unfairly or you will be paying over the odds.
• Get the seller to agree to a lock-out agreement – This is a legal agreement between the seller and the buyer. It is a formal agreement that the seller will not sell or market the property to another person. Should the seller break this agreement, then the buyer can recover ‘wasted’ costs – however, it does not allow you to force the homeowner to sell the property only to you. 
• Take out home buyer protection insurance – This is a specialist insurance policy that covers you for the loss of upfront expenditures should the purchase fall through. Although you should always check the policy wording, this normally covers things such as legal costs, survey fees and mortgage lending expenses. For a full explanation of the kind of expenses you can expect, see our guide: What fees do I need to pay when getting a mortgage?

This is the where a buyer has made an offer that has been accepted by the seller, but then revokes the first offer to make a lower bid – usually just before contracts are signed.

As with gazumping, gazundering is considered an unscrupulous act, although again, it is not illegal. Typically, this is a strategy that is used by buyers to force the seller to accept their new, lower offer while under the threat that if they don’t the buyer will pull out of the deal entirely.

If you are the victim of gazundering then you must decide as to whether you are prepared to walk away from the sale or to accept the lower offer. However, it would pay you to remember that if you accept the lower offer, there is nothing stopping the buyer from attempting this ploy again with an even lower bid – again under the threat of pulling out entirely. In this case, you could find yourself in a reverse bidding war.

Mortgage brokers remove a lot of the paperwork and hassle of getting a mortgage, as well as helping you access exclusive products and rates that aren’t available to the public. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and are required to pass specific qualifications before they can give you advice.

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