Gazumping & Gazundering: Ensuring Business Protection
- AuthorSara Garnett
There is no worse feeling than getting close to contracts being exchanged and one party withdrawing from the transaction leaving the other party without a buyer for their existing property or without the property they were planning on moving into.
Communities Secretary, Sajid Javid is wanting to improve the house buying process for buyers to try and increase the number of homeowners and I think we would all agree with his ambition of making the process of buying a property "cheaper, faster and less stressful".
One of the problems he has focused on is "gazumping" where the seller accepts a higher offer from a different buyer after agreeing a sale. This can result in heartache for buyers as well as the buyers losing out financially after having paid for searches and surveys.
However, it is not just buyers who run the risk of losing out after terms have been agreed for the sale of a property.
A seller may have agreed a sale and then turned down other interested parties only for the buyer to withdraw from the transaction or to reduce the price they are willing to pay.
Although not fool-proof there are a number of steps which buyers and sellers can do to reduce the risks under the current conveyancing regime.
A buyer should make sure that they are in a position to proceed quickly once terms have been agreed.
They should ensure that they have a mortgage offer in principle and that their finances are in order. They should instruct their solicitor promptly and make sure that the solicitor has everything they need to progress the legal work such as evidence of their identity, money for searches and authority to proceed. Anything which can be done to reduce the time between making the offer and exchanging contracts will reduce the risk of the seller receiving a better offer.
In some circumstances, a buyer may wish to be granted an exclusivity/lock out agreement which would prevent the seller from dealing with anyone else for a specified period and placing an obligation on both parties to do all they can to progress to an exchange of contracts.
A seller should liaise with their solicitor, ideally before marketing the property, to ensure that everything is in order for the sale. This will enable any defects in the title to be rectified at an early opportunity and before it becomes an issue for a buyer.
A seller may also consider taking a non-returnable deposit from a buyer before progressing with the sale. Although ideal from a seller's point of view, a buyer will be reluctant to do so unless it was paid on the basis that the seller has a good and clean title and does not withdraw from the transaction. You can often spend longer negotiating the terms on which a non-returnable deposit is paid than you would spend in getting to the point of exchange.
A seller should respond to any queries raised by the buyer in a timely fashion and provide all the documents relevant to the transaction as soon as possible.
Both parties could obtain agreement from the other party to pay their costs if they withdraw from the transaction which should be backed by a solicitor's undertaking.
This will not prevent the deal falling through but it may help reduce the pain if there is no financial loss.