Buying a New Home What Is Gazumping in Leicester?
Buying a New Home | What Is Gazumping
What You Need to Know | Mortgage Advice in Leicester
Buying a New Home, what Is Gazumping?
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.
Legality of Gazumping
You find a property you like, you make an offer which the seller accepts. The seller then accepts a higher offer. It will undoubtedly feel ‘unfair’ but in England and Wales, gazumping is perfectly legal. The agreement for property buying or selling only actually becomes legally binding once you have exchanged the signed contracts. There is no binding contract until this time, so no party will be liable for any verbal agreement made.
It is common to have a period of time of several weeks between a verbal agreement between the buyer and seller of the property and the actual agreement being signed. 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. 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 choose another offer due to, for example, if there are delays at the ‘purchasing’ side, such as with the mortgage application.
What To Do To – Avoid Being Gazumped When Buying a New Home
There are insurance policies available that you can take out, which will provide you with cover for any losses should gazumping take place.
You may not be able to arrange everything beforehand, 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 are met). Do this before you start looking at properties. This helps 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 particularly 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 certain time period while you work on the mortgage and other property buying requirements.
The preliminary normally works so that both buyer and seller agree to pay a deposit (example, 2% of the property price). If either side looks to back out of the sale or change the price without a valid reason, their payment is made to the other party. The written agreement should consider and take into account elements which would allow for an alteration, for example, such as problems with the survey. The exclusivity granted with this agreement is for a limited period, usually about 10 days from receipt of the contract.
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