Tue 29 Sep 2009
An increase in purchasers and a shortage of stock has led to over 100 sealed bids across our London offices already this year. It comes as no surprise then, that we are seeing more and more situations of gazumping, a phenomenon that contrary to popular belief, is NOT advocated by Estate Agents.
Gazumping, is when a seller accepts a higher offer from a buyer, despite having already accepted an offer from another purchaser. This can be very frustrating for the gazumpee, who in some cases, will have already committed financially to legal fees and surveys, as well as the emotional attachment to buying a new home.
However, as the law currently stands, if an agent receives an increased offer at any time prior to an exchange of contracts, they are legally obliged to submit the offer to their clients. In actual fact, it is a criminal offence not to do so, not just a civil offence which would be bad enough.We appreciate how frustrating and sometimes unfair the process of buying a property can be and this it is not something that any estate agent will take pleasure in. It is sometimes said, Estate Agents love gazumping as it earns them extra commission however the tiny amount of extra commission earned is nothing compared to the distress and bad feeling caused.
As the man in the middle, it is our job to represent our client (the seller) and to be able to present good news and bad and as a result an Estate Agent can very often takes the blame and become a scapegoat. I view this as an inescapable part of our job.
The only way to avoid gazumping, or even gazundering (where a buyer drops their offer just prior to exchange) is to impose a non-refundable deposit. This is not a panacea: too low a deposit and the buyer or seller still have no major reason to stick with the status quo, too high a deposit and the lawyers have a field day drafting a contract looking at the reasons that the deposit may or may not be refunded.
It is not a new problem and nor is it easy to solve, however I would favour a system where following a survey, 1% of the purchase price was put into an escrow account by both seller and buyer, subject to finance and contract only, with a defined period of time in which to exchange contracts.
Still not perfect, but a step in the right direction until central government steps in to standardise the buying process.