Being a First Time Buyer in Leicester when you have an offer accepted, you would be likely to think you have the home of your dreams and its time to celebrate. You have even made your mortgage arrangements.
However, be aware that you are not quite there yet; the seller could still accept a higher offer from another buyer. We take a look at gazumping and explain everything related to it.
You find a property you like, and you make an offer which the seller accepts. The seller then agrees with a higher offer. It will undoubtedly feel ‘unfair’, but in England and Wales, gazumping is perfectly legal.
The agreement for property buying or selling becomes legally binding once you have exchanged the signed contracts. There is no binding contract until this time so that no party will be liable for any verbal agreement made. It is common to have a period of several weeks between a deal between the buyer and seller of the property and the real deal getting signed.
In any case, this is due to various factors such as a property survey and a conveyancer running the required searches and receiving a mortgage offer. During this period, the seller can accept another buyer’s offer. However, this usually happens for properties with higher demands which increases that property’s worth.
It is also possible that the seller chooses someone else’s offer, they could be keen to sell the property quickly, and they may select another offer due. For example, if there are delays at the ‘purchasing’ side, such as with the mortgage application.
There are insurance policies available that you can take out, which will provide you with cover for any losses should gazumping take place.
Avoid Being Gazumped, and there is no fool-proof method to stop yourself from being gazumped. You can ensure that you take steps to be prepared to lessen the probability of being gazumped.
You may not be able to arrange everything beforehand, and you can make arrangements by finding surveyors in advance. Also, find a conveyancing solicitor to work with plus any other related elements of the property purchase to be able to complete these elements quickly and help to complete the purchase as soon as possible.
Arrange a ‘mortgage agreement in principle’, (this is a conditional offer for you to receive a mortgage if certain conditions get met). Do this before you start looking at properties. It is helping to speed up the mortgage process at the later stage.
You could ask the seller to take the property off the market as part of the offer. While the seller is not required to take the property off the market before any legal documents, it is helpful, and many sellers will do so mainly in flat housing market areas.
You could also consider a preliminary (also known as lock-in, lock-out, or exclusivity) agreement from the seller. The seller then can not engage in negotiations for the same property for a specific period while you work on the mortgage and other property buying requirements.
The preliminary works typically so that both buyer and seller agree to pay a deposit (for example, 2% of the property price). If either one backs out of the sale or changes the price without a valid reason. Their payment gets made to the other party.
The written agreement should consider and take into account elements that would allow for alteration, for example, such as problems with the survey. The exclusivity granted with this agreement is for a limited period, usually about ten days from receipt of the contract.