Property Gazumping is Back! How Do You Avoid It?

The UK property market is moving at its fastest pace in the last 5-years, taking an average of 22-days to sell a property compared to 42-days in May 2019.

Properties are selling for more than the asking price, with one in three sold for a price higher than asking in April 2021. More than a third of buyers paid an average of £16,000 more than the asking price.

With the first stage of the Stamp Duty Land Tax Holiday coming to an end on the 30th June, it was expected that the property market would cool down in May and June as there would not have been enough time to rush through a property purchase to benefit from the holiday. Despite this, the property market continued to grow.

Buyers continue to reassess their living space, with demand for larger properties to accommodate flexible working arrangements and their new lifestyle. There is also demand for access to outdoor green space as we do not know if there will be further lock downs with the COVID pandemic given the various mutations.

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What is Gazumping?

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Gazumping is offering more money to a property seller whilst they have already agreed a sale with another buyer, but have not exchanged contracts on the purchase, legally locking them in. The practice of gazumping is not illegal as the buyer and seller are only bound once contracts have been exchanged, but there are fresh calls to make it illegal.

Two in five property sales end up falling through as another buyer has offered more money, according to Comparethemarket.com. This was the top reason for property sales falling through over the past 12-months, with many disappointed buyers impacted by this immoral practice.

Where a property seller withdraws the property from the original buyer, the purchaser will likely have already paid good money for property searches, surveyors, valuations and may have to pay abortive legal fees; therefore, could have incurred costs of several thousand pounds, with no recourse.

Scotland operates on a different system where a property transaction becomes legally binding once the written offer has been accepted.; therefore, if gazumping was to be made illegal, it would see a complete overhaul of the legal process of buying and selling property in England and Wales. This means that seeing changes to the law in the short-term are unlikely, so the practice will unfortunately continue.

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How Do You Avoid Gazumping?

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Buying property during construction, known as off-plan, direct from property developers typically entails fixed pricing.

Properties can be reserved exclusively for you to buy, with just a small reservation fee to avoid being gazumped by another buyer during the transaction to purchase.

Buying property off-plan also benefits buy-to-let property investors by:

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• Buying at a discounted below market value price
• Taking advantage of developer incentives to reduce the cost of buying
• The increase in property prices during construction without having to manage the property

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Register your interest in buying off-plan property today by completing our quick and easy 60-second questionnaire and our property experts will be in contact with a variety of options that meet your investment criteria.

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