A guest post by Compare My Move
Buying a house is certainly not an easy process, from having to compare estate agents and deal with mortgage companies, to searching for reliable removal companies. However, dealing with the disappointment of losing out and being gazumped after you’ve put an offer down can add additional stress to the process.
The word ‘Gazumping’ is used a lot, but what does it actually mean and, more importantly, how you can minimise the risk of it happening to you?
Gazumping described the following chain of events: you have made an offer on a property and it has been verbally accepted, the seller then receives a higher offer and accepts it, allowing the other buyer to acquire the property and leave you without one. It can feel incredibly unfair and happens more often when house prices are increasing, but in general it can occur on the property market at any time. Some sellers even use a tactic to get as high an offer from you as possible by telling you they have received a last minute high offer (whether it is true or not).
In many cases, potential buyers have already paid the surveying bills and legal fees which can run into the thousands, and these buyers face the prospect of missing out on a property and potentially losing money.
To help you avoid this, we’ve partnered with Comparemymove.com to outline ways of minimising the risk of Gazumping and help you secure your dream home.
Generally, acting as quickly and efficiently as possible will increase your chances of securing your dream home.
When your offer is first accepted, you probably won’t have everything you need in place yet. Try and arrange a survey to take place as soon as possible so that there’s less time for the seller to receive a higher offer and change their mind.
Get a ‘Mortgage in Principle’ before you put in an offer
This is a conditional offer made by a mortgage lender, stating they will ‘in principle’ give you a loan up to a specified amount if certain conditions are met. It’s best to organise this before you even start looking at properties, meaning the process is then quicker when you make an offer on a property.
Instruct a Conveyancing Solicitor
Once again, planning ahead will make the house buying process easier, so finding a conveyancing solicitor you want to work with is going to be a priority. We would suggest choosing a conveyancing solicitor at the same time you look to put in your first offer on a property. You can then instruct them as soon as your offer is accepted, reducing unnecessary downtime that could allow a rival buyer time to accumulate additional funding.
What Else Can You Do?
If you have everything in order, have hired your solicitor and conveyancer, made an offer and met all of the conditions of sale, all that is left for you to do is ask for the property to be taken off the market. If your seller can see you are serious about your offer and that you are ready to proceed, there is no reason that they shouldn’t agree.
If a property is removed from the market and you have displayed that you are both organised and serious, a seller has far less incentive to engage additional buyers. Keep in mind that until you exchange contracts, a seller can back out of the deal without penalty. However, there is still a way you can further secure your offer…
The Lockout Agreement
A lockout agreement is a formal way of buying time for you to get everything in order without having to worry about the seller accepting other offers. This agreement can also be referred to as a preliminary or exclusivity agreement.
With agreements like these, both the buyer and seller usually agree to pay a deposit (generally 2% of the property price). If either side backs out with no valid reason (as set out by the agreement), the deposit then goes to the other party.
The written agreement will also include a list of aspects that will allow for an alteration of the deal, such as any problems with the survey. The lockout agreement usually lasts for a limited period, generally 10 days from the receipt of the contract.
Of course, a lockout agreement will cost you in legal fees and whilst it helps secure your offer it still does not guarantee the purchase. There is no way to 100% guarantee your property purchase, until the point of completion, but if you plan ahead and act efficiently you can reduce the risk of your offer being gazumped.
About the Author:
Compare My Move aims to provide an accessible and efficient comparison service for home and office movers looking for quality removal companies in the UK.
Find out more by visiting the Compare My Move website.