Buying a house Gazumping and sealed bids

house keys in door

Increase your chances by getting a mortgage agreement in principle before making an offer

Find out what gazumping means and how to avoid it, plus how to increase your chances of having your offer accepted in a sealed bids or 'best and final offer' situation.

In the current market it has become increasingly common for multiple buyers to make offers on one property. 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 - and this can result in gazumping. In this guide, we explain how to handle each of these situations.

  • 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

Gazumping

Gazumping happens when an offer has been accepted on a property but a different buyer then makes a higher offer which the seller accepts. When this happens, the 'gazumped' buyer not only loses the house or flat but also any money spent on searches, surveys, solicitor fees and mortgage applications.

Competition in areas where demand for property is greater than supply makes gazumping a more common problem. But how can it be allowed to happen?

Estate agents are legally obliged to pass all offers onto the vendor, so if someone does make an offer on the property after yours has been accepted, the agent has to tell the vendor. In most parts of the UK nothing is binding until contracts have been exchanged, meaning that the vendor is free to change their mind and pull out of the deal at any point before then (as are you). 

  • If you're buying in Scotland, gazumping shouldn't be a problem because properties are withdrawn from the market once contact negotiations start - read all about it in our guide to buying a house in Scotland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 surefire ways of avoiding being gazumped, but if you follow these steps you can make it less likely.

1Before you make an offer

It's important that you present yourself in the best possible light so the vendor knows you're able to proceed quickly and aren't going to pull out of the purchase.

Try and get a mortgage agreement in principle before you make your offer, as this will reassure the vendor and the agent that you can afford the property.

If you've got a home to sell, it's best if you've already accepted an offer on it before making an offer on the property you want to buy. That way, the vendor can be less worried about the chain causing hold-ups.

  • There are more tips on making an offer in the sealed bids section of this page

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 them to change the online listing and for sale board to say 'under offer' or 'sold subject to contract'.

The agent and vendor aren't legally obliged to do this, but you should question their reasons if they refuse - it could indicate that the vendor would consider accepting a higher offer from another buyer.

3After your offer is accepted

Speed and preparation are crucial. The longer a sale goes on, the more time you give the vendor to back out. 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 timeframe. This reduces (but doesn't eradicate) the chance of being gazumped as there will be a smaller window when another offer can 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 worse, there is still a small risk that the seller simply waits until the exclusivity period is up, finds any reason to reject the deal and sells 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 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.

Emphasise 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 and 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, but don’t feel pressured into paying more than you can afford.

If the vendor does go with the other buyer but you still like the house, keep in touch with the agent so that you're front of mind if the sale falls through with the other buyer.

Resist the temptation to bid more than the home is worth

 

Sealed bids

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 is called a sealed bid.

This can be daunting but it isn't legally binding: either party could potentially 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 pay more than it's worth, 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 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 - so for example you could bid £200,103 instead of £200,000 - to avoid making the same bid as someone else. It can also be a good idea to submit the offer in person, just before the deadline, to ensure that it is definitely received.

It's completely up to the vendor which bid they accept, if any, and they won't always make the decision purely based 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 makes an offer on a property, 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 there in writing 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 to say the least - but offers often fall through. Keep in touch with the estate agent so that they know you're still interested if this happens. 

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 also means that you may have an edge over others in bidding wars, as buying agents are experienced in negotiating and securing properties in competitive situations.

Buying agents can be expensive, though, and there is still no guarantee of success. 

More on this

Last updated:

April 2016

Updated by:

Joe Elvin

Your home may be repossessed if you do not keep up repayments on your mortgage.

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