Britain: The End of Gazumping?
For British and Scottish home buyers the practise of gazumping in property transactions can be costly and frustrating. The gazumping happens when a buyer has had an offer to purchase a property accepted by the seller, but before the sale is completed the seller accepts a better offer from another buyer. And for now at least it is legal. It is not uncommon for buyers to lose thousands of pounds in non-refundable surveyor, solicitor and mortgage fees.
In order to limit the incidences of gazumping the government has called for reservation agreements that would be a more legally binding contract signed by buyers and sellers for a home sale.
Landlord News reports :
“The idea of a property market without the possibility of being gazumped is a positive one. To install confidence in the individual looking to invest might help to stabilise the entire purchase process. Smoothing out the bumps in the chain of property buying could potentially result in much speedier transactions, and a massive reduction in the fees being thrown into the big black hole of attempted purchases.”
One property tech firm for voluntary reservation agreements is Gazeal who have introduced a new and legal binding contract for buyers and sellers to sign at the beginning of the sales process.
“The legal position of a house Buyer and Seller (between Offer & Exchange of Contracts) is often exploited. It can take up to 12 weeks to complete, which leaves good people at high risk.
“Our new service fixes this uncertainty; when a deal is agreed, it is now enforceable in law. The solution we have created involves a 3-party contract (committing Buyer-Seller to an agreed deal), Title Escrow service, digital Title verification (using the latest technology), and Title Indemnity Insurance. It offers Buyers and Sellers certainty.”
On a yearly basis it is calculated that £270 million in home transactions are lost as a result of gazumping and impacts first-time buyers trying to get on the property ladder.
In an interview with Landlord News Duncan Samuel, Managing Director of Gazeal, said:
“Our research shows that the cost per failed transaction per household is over £1,000 on average and this can be totally avoided by using our legally binding agreement – Gazeal Seal – which has saved our clients so much heartache and money. Research points to 57% of homeowners who have experienced being gazumped. Our process cuts it out.”
“The Government seems determined to improve the housing transaction process and we fully support that. However, Gazeal’s system goes further – even removing the Caveat Emptor (buyer beware) rule in that we guarantee the title on house purchases. Under the existing system buyers or their solicitors have to check the title to ensure its ‘good’. We insure that risk.”
The Gazeal contract offers other options including a 14 day cooling off period should the sale need to be re-evaluated. Should the arrangement be terminated the deposit would be returned.
Buyers must be pre-approved and provide proof for qualifying for a mortgage and get a survey of the property to guarantee that it is acceptable for occupancy.
Gazeal says that by using their contract process “typically reduces transaction times from 77+ days to around 35 days.”
Duncan Samuel of Gazeal says:
“Over 65% of all buyers and sellers are rightly worried they will not make it to completion following an o"er being accepted. We have a system in place, which is working to both speed up the process and to ensure that transactions do not fall-through.”
“This week we have been invited by The Ministry of Housing, Communities and Local Government to work with them to improve what is a broken system. We are proving that this can be done and deserves to be rolled out across the UK’s housing market.”
Payment fee terms by Gazeal requires a £250 from the seller, to be paid when the sale is completed and £250 from the buyer once an offer has been accepted.
And finally the gazumping capital of Britain as reported by emoov.com in 2017 was London at 35% of transactions. The South East was at a gazump rate of16% followed by the North West at 9%, West Midlands at 7% and Yorkshire and Humber with 6 per cent.
Founder and CEO of eMoov.co.uk, Russell Quirk says:
“Traditionally it becomes rife in over inflated markets where high demand, and higher prices, push buyers to resort to dirty tactics in their desperation to secure the property they want.”
“This is demonstrated by some of the more affordable regions of the UK also seeing some of the largest levels of gazumping, such as the North West and the Midlands.”
Note: According to World Wide Words the origin of the term gazumping is said to be : 'Some dictionaries suggest gazump comes from the Yiddish gezumph, to overcharge or cheat. This is supported by the word’s first meaning in English back in the 1920s, to swindle, but others are less sure.' The practise became popular in Britain and Scotland the 1980's.