Many people might long for a return to the 1980s – but not house buyers. Decades on from the gazumping trend, it is back. Eleanor Pringle and Angus Williams investigate.
The boxes are packed. The removal firm is booked. The paint swatches are ordered.
And then the worst happens. The phone rings and hopes and dreams of fresh start in a new home are dashed.
Every person buying a house knows the risk of the sale falling through – but apparently gazumping is increasingly at the root of the problem.
Gazumping occurs when a seller accepts a higher offer having already verbally agreed a sale with someone else.
It usually happens when property prices are increasing – particularly when the administrative work is taking longer than usual.
This is because in the time between verbally agreeing the sale and exchanging the buyer could have made thousands more due to rocketing house prices.
Although perhaps somewhat unfair, gazumping is not illegal.
Neither is its opposite, gazundering, which sees buyers dropping the value of their offer at the last minute.
But this isn’t the first time British buyers have battled gazumping which first became an issue in the 1980s.
The reason the 2020s are seeing a return to such tactics is because of an overwhelmingly demand-driven market, according to Professor Eric Smith of the University of Essex.
He said: “The market is extremely hot at the moment – as it was back in the 80s. I would guess that we saw gazumping back then as a result of Margaret Thatcher’s policies which led to demand for homes going up – the right to buy scheme, for example.
“This time we’re seeing demand increasing for another reason. Partly because of pent-up demand and stamp duty holidays yes, but in long-commute regions like Norfolk, Suffolk and Essex, it’s because people are moving out of London.”
Indeed, according to a report from the London Assembly Housing Committee, 14pc of Londoners wanted to leave the city as a direct result of the pandemic.
A further third wanted to move house – with 46pc of that group saying they wanted to move outside of the capital.
“With the shift to working from home people have realised they might take living further away in return for more space for them and their families – especially if they can continue to work a bit more flexibly. All of these factors just feed the beast.”
He added that gazumping will more than likely be rectified by market forces: “Gazumping isn’t necessarily a bad thing. It’s good for sellers and bad for buyers, but it is the latter group in the transaction which are also carrying out the gazumping.
“When it comes to legislation I think the market will tackle the issue before parliament can. As before, I think we’ll start seeing buyers making cash offers in order to have an exchange date agreed more quickly, or we’ll have agreements that the listing for the house will be taken down upon agreements and so on.”
And an associate at East Anglian law firm Birketts’ offered further insight into what buyers could do to protect themselves.
Laura Smith said: “Currently, about a third of all property sales collapse because one party pulls out of the transaction. There is no legal requirement for the seller or buyer to act in good faith and consequently no penalties are imposed when a buyer is gazumped.
“The buyer can ask the estate agent to see if their terms and conditions require the seller to turn down any offer made after they have accepted an offer.
The buyer could also ask the seller to enter into an exclusivity agreement which fixes the
price and prevents marketing for a certain period up to exchange.
“The industry is very much aware of the issues associated with gazumping – and gazundering. Reservation agreements have been trialled which, if introduced, would see the parties entering into an agreement and placing money into a designated account which would be lost by a party who decides to withdraw without a valid reason.
“A modified version of the home information pack is also being discussed to shorten the period between exchange and completion. Combined, the two proposals would bring England more in line with Scotland’s system of property buying.
“Although the results of the trial are yet to be published, anything that provides more security and mitigates
financial loss should surely be welcomed.”
Jan Hytch, former director of industry body Propertymark and partner at Norwich-based Arnolds Keys said she would support a root-and-branch reform of the housing market.
But she said bringing in new consumer protection laws would be like “putting a sticking plaster over open heart surgery”.
“The consumer will be helped tenfold by changing the process of conveying a property from one person to another,” she added.
“It’s a call that all good agents and all buyers and sellers will be wholeheartedly in agreement with. Anybody who’s ever been through the process, even if they had a smooth transaction, would have preferred it to have either been quicker or more transparent or less procrastinated.”
'It's just so deflating'
A Suffolk dad is calling for more protection for home buyers after his move fell apart at the last minute.
James Rous was hoping to buy a larger home with his partner and three children after outgrowing their home in Framlingham. He claims he offered the asking price and it was accepted but later the home was relisted at a high price.
“I just feel angry,” Mr Rous said. “And I feel let down by the process. It’s been a lot of hard work and a lot expense. We’ve invested in it financially and emotionally over a long period of time.”
He thinks buyers need more protection on the housing market.
“It’s just so deflating,” he added. “And I think the process could have protected us. Even at the start of this process I was worried about investing in solicitors and surveys and things like that because there’s just no protection for the buyer whatsoever.
“I think if the seller was responsible for getting a survey and the searches done before they list the property it would just make the whole process much more sensible and fairer. There wouldn’t be such an onus on the buyer to have to put all the costs up.
“We’ve got a one-year-old daughter, a three-year-old son and a five-year-old son. The boys are obviously old enough to understand what’s going on and were looking forward to moving into a bigger house. Now we suddenly have to explain it all to them.”
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