(Newswire.net — September 26, 2017) — Gazumping rates have been growing at a steady pace in line with falling supply and rising demand. They are at around 36 percent for 2017 so far, almost triple the 13 percent rate experienced in 2015.
Gazumping is the term used in the event of a seller accepting a bid on their property, which is higher than a bid they have already accepted. This transaction results in the original bidder being gazumped.
Peter Wetherell, CEO of Mayfair estate agency Wetherell, explains that the act of gazumping typically happens on properties in exceptionally high demand due to quality, location, or price. These elements could fall at either end of the scale, with the home in question being of the utmost luxury or at the lowest possible price range for the area – both of which will usually generate a lot of buzz as ideal starter homes or ultra-prime family homes.
Although incredibly frustrating, the process of being outbid is a perfectly legal aspect of the house buying process in the UK. The only way to lower the risk of being pushed out of a sale is to act quickly and ensure all surveys and paperwork are completed promptly.
Property buyers in London are hit hardest
The nation has been shrouded in an uncertain political climate and economy over the last 18 to 24 months, which has resulted in fewer properties entering the real estate market as vendors are hesitant to sell. Demand for new stock is rising, and this has led to increasing house prices across the country, which has also resulted in inevitable bidding wars and rising gazumping rates.
Since 2015, a sizable 35 percent of homebuyers have been gazumped in the capital alone, followed by the South East. However, with rates of only 16 percent, this is less than half of the proportion in London. The fact levels of being hit are highest in these two areas is most likely not a coincidence since both locations are home to some of the most in-demand properties in the UK and London offers some of the most luxurious and expensive properties around the globe. Currently, buying a property in London can set you back an average £481,345, where average prices in the South East are £315,807 – of which both are significantly higher than the current UK national average, at £220k.
The rest of England have experienced some levels of gazumping, but at much lower rates than in the South. At almost a quarter of the rate in London, the North West is third in line at nine percent, followed by the West Midlands at seven percent, and Yorkshire and Humberside at six percent. The average values on the market in these areas are much lower, however, and therefore, bidding wars and demand are not to the same degree.
At the bottom of the list is Scotland. Only one percent of property buyers have been affected in the most northern parts of the UK. It is often thought that gazumping is illegal in Scotland, which is not true. However, a variation of laws does create a difference and is why the percentage here is so small. When a bid is accepted in writing in Scotland, it is a legally binding agreement, and although the vendor could go on to secure a higher bid, should they receive one and want to accept it, their solicitor would not be able to proceed with the sale if they are bound by Scottish law. The only instance where this would be ok is if the sale is being processed with a solicitor bound by English law, which is not convenient for most residents of Scotland due to location and potentially doubles the fees by switching solicitor halfway through the transaction and is therefore why gazumping is rare in this country. The second accepted bid would most likely need to be exceptionally higher for it to be worthwhile for the property seller.
The data researched proves that people buying in areas with soaring property prices and increased demand are at the highest risk of being gazumped and should take precautions when making a bid.
How to increase your chances of securing a purchase
There are steps a buyer can take to reduce the risk of being knocked off the ladder when they are so close to buying their new property. Essentially, it all comes down to speed. A cash purchase will most certainly appeal to a vendor more than when a mortgage is required, as this will inevitably complete much faster. However, it would be foolish to assume many people could afford to buy properties outright with cash and so the best course of action is to arrange a mortgage in principal with your bank or broker before placing a bid on a property. This agreement will provide you with a level of certainty, although not a 100 percent guarantee, that your mortgage will be approved upon having a bid accepted. Following on from this, the application should be finalised and all paperwork completed as soon after the acceptance of the offer as possible.
Additional properties in the mix should also be considered when looking at the speed of a sale. If the buyer has property to sell, not all vendors will wait around if there is a substantial chain and these delays can sometimes allow someone else to swoop in with a better offer or at least a faster offer.
When viewing a property, it is also important to acknowledge the relationship between you and the seller. More often than not, for the person selling the property, it is their home, and they would like to see it go to someone who will look after it and make it a real home for themselves and their family. Some vendors have been known to accept an offer based on the rapport built with the buyer over the highest bid if there’s not much in it. Don’t underestimate the connection between people and their property.
Finally, and perhaps most importantly, in order to actually secure the sale, a realistic offer is imperative. If a bid is accepted, but it’s on the low side, the chances are the vendor, even if they accept it, also think you were taking a chance and you got lucky. The problem with this is if the speed of the sale is not quick enough, there’s a tremendous opportunity left wide open for someone to come along and make a more realistic offer. When it comes to properties in high demand, it’s often not worth making a cheeky offer unless you can close the sale as soon as possible after having it accepted.