What is 'gazumping'?
In areas where demand for property outstrips supply, multiple buyers often compete for the same home - even after an offer has been accepted.
This can result in gazumping, when the seller accepts your offer on a property, but then backs out after accepting a higher offer from a different buyer.
When you're gazumped, you not only lose the house or flat but also any money spent on searches, surveys, solicitor fees and mortgage applications.
Estate agents are legally obliged to pass all offers they receive on to the vendor. This means if someone makes an offer on the property, the agent has to let the seller know, even if a different offer has already been accepted.
In most parts of the UK, nothing is binding until contracts have been exchanged. The seller is free to change their mind and pull out of the deal at any point before exchange – as are you, the buyer. The situation is different in Scotland - check out our guide to buying a property in Scotland to find out why.
How to reduce your chance of being gazumped
There's no sure fire way to avoid being gazumped but, if you follow these steps, you can make it less likely to happen to you.
1 Before 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.
2 When 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 (ideally) '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 is holding out hope for more money.
3 After 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.
In highly competitive markets – or where you’re desperate to secure a property – you might consider drawing up an exclusivity agreement. Under these contracts, you pay the seller a fee in exchange for sole rights to negotiate over the house for a set number of weeks.
You'll need to pay a solicitor to do this for you, and it can get fairly complex. Even with an agreement in place, there is a small risk that the seller will simply delay completion until the exclusivity period is up, then walk away from the deal and sell to another buyer, though this would be quite uncommon.
There are also a number of specialist insurance providers that cover loss of fees, including conveyancers, survey or valuation, and mortgage fees.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.
Often, it can help to highlight anything you have 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.
For some vendors, 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 though someone else has offered a higher price.
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, you shouldn’t feel pressured into paying more than you can afford or more than the property is worth. Even if you miss out this time, you’re likely to be better off holding out for a new home that’s within your price range.
If the vendor chooses the other buyer, that’s still no guarantee that their sale will be hassle-free. With this in mind, it’s worth keeping 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 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 can be a difficult balancing act to decide how much to offer in a sealed bid: 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. There’s also a risk that the mortgage lender will decide the property is worth less than you've offered, leaving you to stump up the extra cash 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 figure you offer, the National Association of Estate Agents (NAEA) recommends avoiding round numbers to prevent making the exact 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.
What to include in your sealed bid 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 the following points:
- Highlight anything that differentiates you from other buyers. Are you chain-free or a cash buyer? This 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 a copy of 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 – for some vendors, it’s meaningful 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)
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, though both are still unusual occurrences.
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 – including via email – 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 sales sometimes 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 buyers’ 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. Buyers’ agents are experienced in negotiating and securing properties in competitive situations.
Many buyers’ agents also claim to have access to properties that haven’t yet been listed for sale. Some buyers’ agents work closely with agents to find out which properties are coming up for sale. They may also actively look for a property on your behalf, such as approaching home owners they believe could be interested in selling in future.
This could be especially useful if your local market is ultra-competitive, or if you’re trying to secure a particular type of property.
At the same time, buyers’ agents can be expensive, and there is still no guarantee of success. You also need to make sure they’re not going to benefit from any commissions or kickbacks if you buy a property they recommend – ideally, their only payments would come from you, so you know they’re acting in your best interests.
Correct as of date of publication.