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  • Can The Buyer Change Their Offer or The Seller Accept Another Once An Offer is Agreed? (Gazump v Gazunder)

    17th November 2017

    Can The Buyer Change Their Offer or The Seller Accept Another Once An Offer is Agreed? (Gazump v Gazunder v Gazang)

    In England and Wales… yes. You or the buyer can change your offer after it has been accepted, although not after you have exchanged contracts. The system is Scotland is slightly different and means gazumping is a rarity because an offer is legally binding.

     

    Gazumping:

    You may have had your offer accepted and possibly paid for conveyancers and surveyors to carry out searches. Then your seller gets a better offer and either accepts it or asks you to match or beat it. You can either raise your offer or walk away but either way this is a gazump.

     

    Why does this happen?

    Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 states a contract for the sale of land must be in writing and is a requirement of English law dating back to the Statute of Frauds of 1677. It was intended to promote good faith and certainty in land transactions. But in a buoyant market where buyers are willing to compete it means that the sale is not legally binding until contracts are exchanged.

     

    Are they allowed to do this?

    Unfortunately, yes. The offer, although accepted, is not legally binding until contracts are exchanged. In the same way, you aren’t legally obliged to buy until you have exchanged. Your surveyor could highlight issues that you aren’t happy to take on and you could walk away.

     

    Do they have to pay the fees you’ve incurred?

    No. Any money spent on conveyancing or surveyors at this point cannot be recouped from the seller.

     

    Why might the seller receive another offer?

    Because the sale is not legally binding until the exchange of contracts has taken place, many sellers prefer to leave the property on the estate agents register. The estate agent, by law, must tell the seller if any offers are made on their property under the Estate Agency Act 1979. It is up to the seller if they want to consider them. The magic rule is 10. A seller will usually stay true to their word unless there is an offer £10,000 higher or more.

    If you want to ensure the property is not left on the market, see our guide to writing your offer confirmation email.

     

    How to avoid gazumping

    1. Request an exclusivity agreement. The seller signs and agrees not to enter any agreements with third parties during a given time period.
    2. Gazumping insurance – these cover fees you incur prior to the sale falling through.
    3. Ask the seller to withdraw the property (in writing to their estate agent) from the market
    4. Keep the seller and estate agent updated on progress
    5. Buy at auction

     

    Gazundering

    This is far less common and occurs when the market is in favour of buyers rather than sellers. Opposite to gazundering, the buyer waits until the exchange of contracts and then threatens to withdraw their offer unless the seller accepts a lower one.

    The seller can refuse to do this and the buying chain can collapse.

     

    How to avoid gazundering

    1. Make sure you have a realistic asking price. Too high and you may find yourself desperately dropping the price to move on time
    2. Be honest about any problems with the property. This way there will be no need for renegotiating after a survey as the price will already reflect what the survey shows.

     

    The risk of gazundering and gazumping can be reduced at the offer stage by making an offer both parties are happy with. See our blog post on agreeing an offer.

     

    Gazanging

    Gazanging describes a scenario where a seller agrees to a sale then pulls out at the last minute leaving the buyer disappointed and out of pocket (having paid for surveys, conveyancing etc). The reason behind this is that the seller is hoping to persuade the buyer to buy at an inflated asking price as they believe the market prices will rise and they could achieve a better price by waiting a few months and putting their property back on the market. It has been known that sellers accept a new offer from the buyer and then string out the process in the hope of gazanging again or gazumping the buyer by finding another buyer who is willing to pay more.

     

    How to avoid gazanging

    1. Ask your sellers about their plans – do they seem serious about selling and finding a new property or are they not bothered about getting a sale soon. Have they actually started looking for properties yet? Be wary of those who say they will rent or live with friends if required – often sellers get cold feet when it comes to it.
    2. Look for sales where there is no onward chain – reposessions, executor’s sales, the owner moving abroad etc
    3. Buy at auction – the property is yours when the final hammer goes down.
    4. Make sure your conveyancer doesn’t delay the process and provide an excuse to the seller to gazang!

     

    References:

    https://www.theguardian.com/money/2001/sep/13/factsheetsonmovinghome.movinghouse

    https://en.wikipedia.org/wiki/Gazumping

    http://www.rics.org/uk/knowledge/glossary/gazumping/

    https://www.ratedpeople.com/blog/gazumping-and-gazundering-guest-post-by-phil-spencer/