How to make yourself Gazump-Proof
There are a number of practical steps you can take to protect yourself from buyers going back on an agreed deal:
1. Don’t make an offer to buy until your own property’s under offer.
2. Exchange contracts as soon as possible by getting your funding sorted early and chasing progress.
3. Get schmoozing – build a good personal relationship with the seller and keep them regularly informed of progress.
4. When making your offer, confirm that the agreed price includes any likely market price increases up to exchange.
5. As a condition of your offer, formally request that the agent withdraws the property from the market, to discourage other offers being submitted. It should even be removed from websites for those who search under ‘sold’ properties, and For Sale or SOLD boards should be removed. Only where a purchaser hasn’t yet got their own home under offer is it reasonable for sellers to keep a property on the market once under offer.
6. Ask the agents if they have a policy on gazumping and whether their clients have confirmed they will not try to change the sum offered at a later stage.
7. Pre-contract deposits
One obvious way to discourage underhand attempts at ‘re-negotiating’ is if both parties put some money on the table as a deposit.
The way this works is that the buyer and seller each fork out a few £ ‘000 (typically 1.5 per cent of the agreed price) to an independent solicitor.
If either party subsequently pulls out without good reason they lose their deposit. Of course, the devil is in the detail and a lot will depend on how you define ‘good reason’ – for anyone wanting to pull out their reason is always good!
Acceptable reasons should therefore be defined in the agreement, such as where the mortgage valuation values the property at a lower price, or a survey unearths a previously unknown serious defect. The beauty of this arrangement is that the seller knows the buyer won’t change their mind at the last minute or pull a stunt; and the buyer, having spent hundreds of pounds on legal and survey fees, knows the seller won’t walk away and accept a higher offer. Perhaps this should be compulsory for all transactions.
A lock-out agreement may sound like something from 1970s trade union folklore, but is actually a very useful device enabling both parties to inject some certainty into the process.
A lock-out (aka an ‘exclusivity agreement’) essentially asks the seller to take their property off the market for a certain number of weeks after you have agreed the price, and not to accept offers from anyone else during this period. Such a deal requires both parties to stick to a strict timetable in return for you putting down a non-refundable deposit.
If the property is being marketed by more than one agent, make sure they are fully aware that it’s been withdrawn and is no longer on the market. Other agent(s) employed on a joint or multiple agency basis could be tempted to undermine the successful agent’s deal to scoop up the commission, and so may take some persuading.
In practice, lock-outs are not always quite the panacea they seem to be. For one thing, it can take a surprisingly long time for both parties to agree all the terms. And what if some unexpected problem with the property comes to light? You also need to consider what would happen if your own sale fell through and you were tied-in to your purchase.
9. It may be possible to arrange insurance that pays out if the deal falls through after an offer has been agreed.
Our next blog – coming soon …….
The importance of ‘buttering up’
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