Government To Ban “Gazumping”
Communities Secretary Sajid Javid announced last week that the government could ban gazumping as part of a overhaul of buying and selling of homes, to make the process “cheaper, faster and less stressful.”
Adding that he wants to apply technology to the process, he has called the current mechanisms “too slow,” and has requested evidence from estate agents,and mortgage lenders.
The government is looking at schemes such as “lock-in agreements” to reduce the 250,000 sales that fall through annually. But the issue that caught the headlines was “gazumping” – when a seller accepts a higher offer from a new buyer and leaves an old buyer in the lurch.
Javid said: “We want to help everyone have a good quality home they can afford, and improving the process of buying and selling is part of delivering that … Buying a home is one of life’s largest investments, so if it goes wrong it can be costly. That’s why we’re determined to take action to make the process cheaper, faster and less stressful … This can help save people money and time so they can focus on what matters – finding their dream home. I want to hear from the industry on what more we can do to tackle this issue.”
Survey Reports House-Buying Stress
According to survey data from the Department for Communities and Local Government, 69% of sellers and 62% of buyers experience stress as a result of delays in the process.
The survey reports that 46% of sellers are worried about buyers changing their minds after making an offer, 24% said they would use a different estate agent in the future, and 32% of sellers and 28% of buyers said they were unhappy with the other party’s solicitor.
Is Gazumping Really The Problem It’s Made Out To Be?
Rachel Inwood, Conveyancing Solicitor at Harold Stock & Co gave us her views on this new development and the real life issues around house sales falling through.
Does Gazumping Still Happen?
“Gazumping has been a problem in the past, but we don’t see it happening as much as we used to. Here in the North West, it isn’t as big an issue as we saw, say, 20-30 years ago.
“Yes, it still happens, and we still do our best to make sure our clients don’t fall foul, but gazumping tends to occur more where housing markets are aggressive and prices have gone through the roof. Buying in, say, London or Bristol, you have to be much more aware of the issue than here in Manchester.”
What Is Causing House Sales To Fall Through?
“One of the stats that was put forward by the recent survey was that 25% of all house sales fall through. This is the case, but gazumping is only one of the reasons. People withdraw from house sales for many other reasons, plenty of them legitimate.
“The reports suggest that one of the causes is surveys reducing prices and people pulling out as a result. This is normal.
“It’s not uncommon for a survey to reveal potential structural issues that the average house buyer can’t see just from the initial viewing. Looking round a property, very few people would be able to identify structural movement or other issues.
“A survey that reveals hidden issues usually means a price negotiation. If the seller isn’t prepared to reduce cost and you don’t have the money to correct the problem, of course you’ll pull out.
“It’s also worth noting that some lenders will withhold money if the works uncovered by a survey are serious enough.”
Will The Government “Ban” Protect House Buyers From Stress?
“There is no doubt that, at the moment, the seller can hold out for the highest price, and that can potentially leave buyers with a very stressful waiting time until contracts are exchanged.
“But, it’s worth remembering that sellers sometimes have legitimate reasons for pulling out too. Looking at it this way, “gazumping” isn’t just about getting the highest offer you can.
“A seller might decide to go for another offer which is the same price as the buyer or lower, because a new buyer can go quicker through the process. It all depends why the sale is going through. For example, in probate sales, the family might want to sell the property quickly for closure and the buyer may have been taking their time. In this circumstance it is understandable that a seller might end up “gazumping” and it might raise the question of whether the current proposed ban accommodates such situations.”
What Can House Buyers (And Sellers) Do To Protect Themselves?
“The best advice is to seek advice. Work closely with a legal professional as soon as you can, preferably before you put in the offer. In that way, you are protected as much as possible and your solicitor can help make sure the process is as smooth and stress free as it can be.
“We always welcome streamlining the process and making house buying and selling as easy as it can be. But we would always want to make sure that all parties are treated fairly and that everyone walks away from the sale happy that they have got just what they want.”
Expert Opinion provided by Rachel Inwood, at Harold Stock & Co.