This expression is thought to derive from a Yiddish term for a swindle and is widely misunderstood. Many people claim to have been gazumped when they have merely lost a property to another buyer who made a higher offer. On that basis everybody – bar the eventual highest bidder – at a public auction could claim they were gazumped!
When a sale is being handled by private treaty negotiation the various bids are not made public. As estate agents our duty is to handle the sale on behalf of the owners and we must report every offer we receive. We will also pass on any additional information that prospective buyers want us to submit. We do this impartially and will not knowingly mislead anyone involved. What we are not entitled to do is tell one prospective buyer what another rival buyer has offered – without the full agreement of both parties. And, of course, we have no say in which offer the seller-client accepts.
Furthermore, we cannot pretend we have an offer that does not exist nor may we deny that we have a number of different offers when that is genuinely the case. There are strict regulations covering all these aspects of sale negotiations. They were drafted by Government lawyers to reflect best professional practice which we would always follow.
So what is gazumping? Remember that home owners have an absolute right to sell their property to whomsoever they wish. They need not necessarily accept the highest offer and they may also change their minds over any aspect right up to exchange of contracts.
In practice gazumping occurs very rarely. It happens where all the terms for the sale have been arranged and matters are in the hands of the respective conveyancers when a higher offer is received at a late stage and the owner tempted to accept. Sometimes the first buyer does not know about this (to them unwelcome) development until their contract is returned. At other times the owner may instruct his estate agent to contact the first buyer to report that they have received this further offer and ask whether they want to equal or better it. That is gazumping.
Sometimes this will arise when the seller has accepted an original offer which was on the low side for the current market conditions – especially when prices were rising. Then another buyer comes along who realises the property’s true worth and puts in a significantly higher bid facing the owner with a dilemma. Being fair to the owner, this first prospective buyer has lost the chance of snapping up an under-priced bargain at his expense.
We always aim to price our properties realistically, advertise them extensively and endeavour to agree a fair price to both parties at the outset. However, the price initially agreed is always subject to final negotiation and, as remarked, we are legally obliged to pass all offers to our clients right up to the exchange of unconditional contracts. Effectively, in this respect, we have no option. But equally we have no real say in any decision to gazump.
There is only one real answer: exchange contracts very quickly. The fact is most transactions move ahead at a speed dictated by the prospective buyers, quite possibly held up by the slow sale of their own property.
These days, with registered title and the rapid progress of electronic conveyancing, there is no reason why contracts could not be agreed in a few days rather than weeks. One suggestion would be to offer to exchange contracts quickly while leaving the completion date open to later negotiation. The seller may be flexible and happy to agree to a delay. This would much reduce the chances of your being gazumped. No promises, but it is a thought.
Some solicitors have devised a form of lock-out agreement (q.v.) – purported to reduce the risk of being gazumped. These are, in effect,
an option to exchange contracts within a pre-agreed period of time. In some cases
these quasi-agreements may even work although one cannot have a binding agreement
to enter a future binding contract – the first agreement would then be the