Colin asked me if I had ever been ‘gazumped’.
Not being familiar with the term, I hoped not!
I’ve been gazanged a couple of times though!
Gazumping occurs when a seller (especially of property) accepts an oral offer (a promise to purchase) on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orally agreeing to a lower one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase. The term gazumping is most commonly used in the UK, Ireland and Australia, although similar practices can be found in some other jurisdictions.
With buoyant property prices in the British residential property market of the late 1980s and early 1990s, gazumping became commonplace in England and Wales because a buyer’s offer is not legally binding even after acceptance of the offer by the vendor. This is because, by s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 and in order to prevent dishonesty, a contract for the sale of land must be in writing, a requirement of English law that dates back to the Statute of Frauds of 1677. This requirement was originally intended to promote good faith and certainty in land transactions.
When the owner accepts the offer on a property, the buyer will usually not yet have commissioned a building survey nor will the buyer have yet had the opportunity to perform recommended legal checks. The offer to purchase is made “subject to contract” and thus, until written contracts are exchanged either party can pull out at any time. It can take as long as 10–12 weeks for formalities to be completed, and if the seller is tempted by a higher offer during this period it leaves the buyer disappointed and out-of-pocket. Asking price has no impact on whether a property has been “gazumped”. Any offer over a previous offer that is subsequently accepted is known as gazumping.
When property prices are in decline the practice of gazumping becomes rare. The term ‘gazundering‘ has been coined for the opposite practice whereby the buyer waits until everybody is poised to exchange contracts before lowering the offer on the property, threatening the collapse of a whole chain of house sales waiting for the deal to go through. ‘Gazanging‘ describes a similar situation, where a seller pulls out of a sale entirely, expecting to get a better asking price or offer once the market improves.
In California, realtors are quick to sign buyers and sellers to a legally-binding contract. Once signed, our sellers can not back out – only buyers have contingencies that allow them to cancel.