Buying a home
Gazumping and sealed bids
By Joe Elvin
Article 12 of 13
Gazumping and sealed bids
Find out what gazumping means and how to avoid it, plus learn how to increase your chances of having your offer accepted in a sealed bids or 'best and final offer' situation.
In today's fast-paced market, multiple buyers may compete for the same property, with vendors choosing between offers. When this happens, estate agents will often ask all interested buyers to submit a sealed bid or 'best and final' offer by a set deadline.
Sometimes, even after the seller has accepted an offer, another buyer will bid, resulting in 'gazumping'. In this guide, we explain how to handle each of these situations and avoid losing out on your desired property.
- If you're buying a property and want independent, expert advice on the best mortgage for your personal circumstances, call Which? Mortgage Advisers for free on 0808 252 7987
What is 'Gazumping'?
Gazumping happens when the seller accept your offer on a property, but then backs out and instead accepts a higher offer from a different buyer.
When you're 'gazumped' as a buyer, you not only lose the house or flat but also any money spent on searches, surveys, solicitor fees and mortgage applications.
How does gazumping happen?
Estate agents are legally obliged to pass all offers on to the vendor. This means if someone makes an offer on the property after yours has been accepted, the agent has to let the vendor know.
In areas where demand for property is greater than supply, competition is fiercer and gazumping becomes a more common problem.
In most parts of the UK, nothing is binding until contracts have been exchanged. The vendor is free to change their mind and pull out of the deal at any point before exchange - as are you, the buyer.
- If you're buying in Scotland, gazumping shouldn't be a problem because properties are withdrawn from the market once contact negotiations start – read all about it in our guide to buying a house in Scotland
How to avoid being gazumped
There are no sure-fire ways of avoiding gazumping but, if you follow these steps, you can make it less likely.
1Before you make an offer
- Present yourself in the best possible light so the vendor knows you're able to proceed quickly and aren't likely to pull out of the purchase
- Try to get a mortgage agreement 'in principle' before you make your offer - this will reassure the vendor and the agent that you can secure funds for the property
- Ideally, accept an offer on your current home before making an offer on a new one to ensure timing won't be an issue
2When you make your offer
- Tell the estate agent that your offer is subject to the house being taken off the market, with no more viewings conducted
- Ask the agent to change the online listing and for sale board to say 'under offer' or 'sold subject to contract'
While the agent and vendor aren't legally obliged to do this, you should question their reasons if they refuse – it could indicate that the vendor would consider a higher offer if one was received.
3After your offer is accepted
- Keep chasing things up with your solicitor or conveyancer and the agent, and make sure you read, sign and return forms and paperwork as promptly as possible
- If you're really worried about gazumping, you can draw up a contract that says both parties will exchange within a particular time frame. This reduces, but doesn't eradicate, the chance of being gazumped, as there will be a smaller window for another offer to be made.
- Your contract could also stipulate that, if the vendor backs out, they will pay you an agreed amount as compensation.
Exclusivity agreements are another option: you pay the seller a fee in exchange for sole rights to the house for a set number of weeks.
You'll need to pay a solicitor to do this for you, and it can get complicated. Even with an agreement in place, there is a small risk that the seller will simply delay until the exclusivity period is up, find a reason to reject the deal and then sell to another buyer later on.
There are also a number of specialist insurance providers that cover loss of fees (conveyance, survey/valuation, mortgage). However, you should read the policy wording carefully as there are always exclusions and limits to any cover.
What to do if you’re gazumped
If you hear from the estate agent that another buyer has made a higher offer, all may not be lost.
Highlight anything that stands in your favour – for example, if you're chain-free (eg a first-time buyer with no other property to sell) or a cash buyer who doesn't need a mortgage.
Sometimes, time is more important than money. If the seller realises that the sale will complete more quickly if they stick with you, they might do so even if someone else has offered more money.
If this doesn't work and you still want the property, you could consider increasing your offer to match or beat the new buyer. However, don’t feel pressured into paying more than you can afford or than the property is worth.
If the vendor does go with the other buyer, keep in touch with the agent so that you're front of mind if the sale falls through.
If more than one person makes an offer on a property, the estate agent will sometimes ask all the interested buyers to submit a bid in a sealed envelope by a set date.
This can be daunting, but it isn't legally binding: either party could potentially still back out at any point before contracts are exchanged.
How to make a sealed bid
It's very difficult deciding how much to offer: on the one hand, you don't want to over-pay but, on the other, you don't want to lose out.
You need to be realistic about the property's value, because if you pay over the odds, you may struggle to get your money back when you come to sell it. Also, if your mortgage lender decides that it's worth less than you've offered, you may have to stump up the extra cash yourself or pull out of the sale altogether.
- Our guide on house prices explains what sellers should take into account when setting the asking price on their property, which will help you work out the property's value
When it comes to the exact figure you offer, the National Association of Estate Agents (NAEA) recommends avoiding round numbers to prevent making the same bid as someone else – so for example you could bid £200,103 instead of £200,000.
It can also be a good idea to submit the offer in person, just before the deadline, to ensure that it is definitely received.
Sealed bits: What to include in your offer letter
It's up to the vendor which bid they accept, if any, and the decision won't always be based purely on price. Along with the amount you're offering, you should use your offer letter to:
- Highlight anything that differentiates you from other buyers: are you chain-free or a cash buyer? These could help speed things up and lessen the chances of the transaction falling through.
- Show that you can definitely afford to buy the property: enclose your mortgage agreement in principle to prove that you'll be able to borrow the necessary amount.
- Demonstrate that you're ready to get things moving as soon as they accept your offer: include details of your conveyancer and, if you're selling your own home, explain what stage you're at with the sale.
- Explain what you love about the house: selling a home can be emotional, and some vendors will want to know that the new owners will enjoy living there as much as they have.
Find out more: read the Which? Mortgage Advisers guide to mortgage agreements in principle (AIPs)
Best and final offers
When more than one person wants to make an offer, some estate agents will ask buyers to submit their 'best and final offer' to the vendor by a set date. In some areas, this is now more common than sealed bids.
The best and final offer process works in a very similar way to sealed bids; the main difference is that your offer doesn't have to be formally submitted in an envelope.
Some people submit their best and final offer over the phone, but we'd advise doing it in writing – an email to the estate agent should be fine – so that all of the details of your offer and situation are laid out for the vendor to see.
Along with the amount you're offering, include all of the information that you would in a sealed bid (see section above).
What to do if your bid is rejected
Getting a call to say that the vendor has chosen another buyer is disappointing. But keep in mind that offers occasionally fall through.
If you stay in touch with the estate agent, they'll know you're still interested if the other buyer drops out of the sale.
Using a buying agent
If you live in a competitive area and have lost out a few times, you could consider hiring a buying agent to represent you.
This not only shows vendors that you're committed but may also give you an edge over others in bidding wars. Buying agents are experienced in negotiating and securing properties in competitive situations.
At the same time, buying agents can be expensive, and there is still no guarantee of success.
- Last updated: March 2016
- Updated by: Stephen Maunder