Though you have done every single thing you can think of just to make things go smoothly, there are still a few occasions wherein things can go tremendously wrong. One of the major complications encountered by most home-buyers is ‘gazumping’, it’s a horrible practice that can be both financially and emotionally exhausting for the ‘gazumped buyer’. This is commonly prevalent in England and Wales, though not in Scotland.
What Is ‘Gazumping’?
It is when a seller takes an offer from one prospective buyer, but then takes a higher amount offered by someone else. This could lead to situations where the first buyer has to accept that they have lost that home and continue looking for another one, or worse, offer a higher price just to obtain it. This pattern tends to occur in a market when house prices continue to boost up due to high property demand, but low on supply.
The obvious problem is that until official contracts have been exchanged, the sale agreement is not yet lawfully binding. After your offer has been accepted, you or the seller can still withdraw at any time, until the exchange of official contracts.
Unluckily, agents are legally obliged to notify sellers of all the offers on their property, even after one deal has already been accepted. The time between the acceptance of your offer and discussion, you as the buyer devote a significant amount of money and time on solicitor’s fees, surveys, and the approval of your mortgage. A lot of effort would definitely be wasted when you end up empty handed.
However, In Scotland, the seller is obliged to provide written acceptance of an successful offer. This is legally binding and is further supported by Scottish solicitors’ code of practice, which forbids working for a client who is seeking other offers after a written acceptance has been made.
How Can You Avoid This From Happening?
- The faster you process the sale, the less chance there is for the seller to draw out
- Pick a seller whose agent has a policy against ‘gazumping’. Some agents would have the seller sign an agreement to refuse any offers after one has been accepted.
- Have regular contact with the seller’s agent and inform them when you have already completed a survey and received a formal mortgage offer. This way they can be assured that the sale is progressing
- Set down an exclusivity agreement with the seller at the moment when your offer has been accepted. In return for a certain amount, this gives you an exclusive right to the property as long as contracts are exchanged within a specified period.
- Insist that the house be removed from the market once your offer has been accepted by the seller.
Potential Problems to Watch Out For
There are a few other circumstances which you may find yourself involved, so you may need to take extra precautions.
The Race of Contracts
If there are two or more prospective buyers for the property, the seller may give out contracts to more than one buyer. The buyers will then race each other to send a deposit, and the signed contract gains the property.
Contract races typically happen when there is a serious lack of properties available. You may win this race, but if not, you could lose a lot of precious cash from all the costs during the race period. Always consider if this is worth all the trouble or not.
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