It is something that the right-minded among us would like to slam the door on but a red hot property market and a lack of stock have combined to fuel a rise in gazumping.
This show of greed sees unscrupulous sellers agreeing an offer for their home then accepting a higher offer from another buyer. It can also involve a seller increasing the asking price of their property or demanding more money at the last minute when the buyer is easy to hold to ransom.
Jordan Yorath of Monroe estate agents says: “I hate gazumping. It is immoral but we are seeing more of it.” The most recent example came when one of his vendors was gazumped on the house they were planning to buy via another agent. Their own home was under offer with us and they had agreed to purchase a bungalow in the same sought-after area.
“They needed single storey living because they have a disabled child. They thought everything was progressing well and had done the searches and survey and were heading towards completion when they saw that the bungalow they were buying was up for sale with another estate agent for £35,000 more.
“They were devastated. The owner of the property had obviously decided he could get more money for his house. He didn’t even ask if the couple would pay more, he just remarketed it and refused to take their calls.”
While upset, Jordan’s clients have acted honourably by not pulling out of the sale of their own home, which means they won’t be letting down the other two people in their property chain.
“It’s a seller’s market and that means we are seeing some horrible behaviour,” says Teresa Galley of Doncaster-based Galley Properties. She recently witnessed the heartbreak caused when shameless sellers held first-time buyers to ransom.
“The young couple had their offer accepted for a few thousand pounds over the asking price on the proviso that the vendors could stay in the house until they found somewhere to buy.
“After a few months when the vendors were ready to leave, they told the first-time buyers that they wanted more money because house prices had risen.
“It was awful because the buyers were effectively being punished for doing the vendors a favour,” says Teresa.
Tim Gower at Robin Jessop Leyburn office, which covers the Yorkshire Dales, says taking a property to best and final offers can often combat gazumping.
“We have seen a few attempts at gazumping but taking the property to best and final offers generally avoids this problem as we emphasise to both the prospective buyers and clients that once offers are received by the deadline, that is it. It doesn’t, of course, prevent a subsequent offer coming in and we have had a few examples of it being tried, but most clients have honoured the original agreement. If a client was in any way tempted, I would always point out that, as a matter of courtesy, it should be offered to the existing buyer to match the new offer.”
One way of avoiding the risk of gazumping entirely is by buying a property by modern method of auction, aka MMA. This sees properties marketed on estate agency websites and portals, as usual, but would-be buyers are invited to bid for them in a timed auction that usually lasts for a few weeks.
The property can still be viewed in person and there is also the benefit of a legal pack. The winning bidder has 56 days to complete which allows time for arranging a mortgage.
The costs to a seller are minimal as there are no agency fees, just the £445 for the legal pack.
However, the winning buyer must pay a non-refundable reservation fee, which is usually £6,000 plus VAT. This is then split between the auction company and the estate agent. Buyers must be aware that this fee is a premium paid on top of the purchase price and cannot be part of any mortgage borrowing.
“MMA is becoming more and more popular because it is a transparent process and there is certainty for the seller and buyer. When the timed auction ends, the highest proceedable bidder wins and there is no renegotiating on price. It’s a much faster process,” says Teresa Galley who is a fan of MMA in the right circumstances.
“The perception was that these auctions were used for unmortgageable properties but that is not the case now, though it isn’t for everyone. Buyers have to be aware of the reservation fee and add that to their budget and it is no use to sellers who are dependent on a property chain as they have eight weeks to move once the auction has ended.
“It is, however, useful for selling rental properties, empty homes and properties that need to be sold due to divorce.”
It is rare for a legally-binding auction sale to fall through and iamsold.co.uk, the MMA facilitator, says the chance is less than five per cent.