Two terms buyers and vendors fear are 'gazumping' &...

Entering the London property market can be a daunting process, for any purchaser or vendor (seller) there is a lot you need to know. For some, it can often seem like the professionals in the industry (estate agents, conveyancers, mortgage brokers etc) are speaking another language which can lead to anxiety and confusion.

Two important terms that buyers and vendors fear most are 'gazumping' and 'gazundering'

The practice of gazumping occurs when a vendor has already accepted an offer from a potential buyer, and then accepts a higher offer from a different buyer.

When an offer is accepted by a vendor and this has been confirmed by their acting agent in writing, a property should be withdrawn from the market and all outstanding viewings cancelled with immediate affect. This window of exclusivity should last 2-3 weeks to allow the purchaser time to engage solicitors and book a survey. However, some vendors may ask their estate agent to continue with viewings if the offer received is below their expectations, this should be made clear to the purchaser that has made the offer.

Gazumping can also occur when a buyer who has already viewed the property comes back with an offer after a prolonged period of time, thus disrupting the existing sale.

"We will ultimately disappoint all except one successful purchaser which is never nice"

At Butler & Stag we don't condone or practice gazumping, from what we see and hear, it's the by-product of an extremely competitive market place. In situations where several purchasers pursue one property, estate agents find themselves in a difficult position as although we work for the vendor, we will ultimately disappoint all except one successful purchaser which is never nice. Regardless of how fair and transparent we make the offer process before a sale is agreed, we have known situations when some buyers having missed out on a property and simply won't take no for an answer. The worst known case resulted in the buyer knocking on the vendor's door, expressing their disappointment in losing a property and offering more money than they were prepared to when at the best and final offer stage. In other scenarios, purchasers having lost out on a property phone the office days or weeks later with an increased offer. It is worth noting, estate agents are legally obligated to forward all offers to the seller both verbally and in writing, regardless of how low or high until contracts have exchanged. If the vendors head is turned and they consider an offer which gazumps the existing one, we would strongly advise the vendor that the initial buyer should be given first refusal to match the new offer in the interests of fairness. However, as the estate agent, we merely act for the vendor and ultimately the final decision rests with them.

Please bear this in mind when telling your friends down the pub, that the 'lying' estate agent has sold the property to someone else for more money, as this maybe very far from the truth!

The practice of gazumping is an unfortunate one which has multiple consequences for the initial buyer. First off, they will stand to lose out on any money they have spent throughout the process so far, should the vendor choose to accept the new offer. This can include initial legal fees in addition to survey costs which can amount to in excess of £1,000. As well as monies lost, there is the obvious emotional turmoil which the buyer would subsequently go through having lost out on their dream home.

Gazundering is a role reversal of sorts.

This occurs when the buyer reduces an existing offer on a property. Generally, buyers will reserve this reduction until the sale is near exchange of contracts, thus placing huge pressure on the vendor of the property to make a decision. This can cause quite a predicament for the vendor, especially if they are tying in a purchase with the sale and there is pressure from the chain above. If a vendor rejects the revised bid then this can cause the whole chain to collapse. Gazundering generally occurs in weaker or downturn markets, common in the early 90's and most recently in 2008.

The motivation to gazunder can be triggered from media speculation in houses prices falling, cheaper comparable properties coming on to the market or the immoral tactics of booking a last minute survey before exchange in the hope of finding defects that support a reduction.