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The Government yesterday announced that in an effort to improve the housing market, they will be looking at ways to speed up the buying and selling process. In particular, they will look into the practice of ‘gazumping’; and improving the trust and confidence between buyers and sellers.
Gazumping is when part way through the conveyancing process, the seller accepts a higher offer from another buyer. This means that the original buyer loses out on the home they want. This is despite potentially already having spent money on searches, surveys and mortgage applications. There is nothing the buyer can do when this happens, since they have not yet exchanged contracts with the seller. So the seller is not legally bound to sell the property to them.
Sometimes, a buyer can turn the tables and ‘gazunder’. This is where, right at the last moment, they drop the price they are prepared to pay for the property. This leaves the seller, who may have a dependent onward purchase, in the difficult position of either having to accept less money or start the process all over again with a new buyer.
The government has carried out a survey to establish the extent of these practices. The results indicate that only 1 per cent of sellers reported pulling out of a sale because of a higher offer from another buyer. However, the fear of gazumping or gazundering creates a high level of distrust and makes the whole process very stressful.
Once contracts have been exchanged, then neither the seller or the buyer can change the terms of the agreement. This is because it is only when the conveyancers exchange contracts that the sale and purchase become legally binding. Prior to that, either party can walk away with no obligation to the other party.
This means that it is very important to try to get contracts exchanged as soon as possible. But the flipside of this is that once exchanged, you won’t be able to back out or change your mind. So you must make sure that you and your solicitor have carried out all checks, surveys and due diligence before committing.
Gazumping doesn’t happen when buying and selling in Scotland, or America, for example. This is because once a buyer puts in an offer in these countries it creates a binding agreement. This is rather like when we purchase at auction in England and Wales. This seems to be a simpler method, but can have other drawbacks. For instance, much of the legal work must be prepared before an offer is even made on the property. This can mean paying money out upfront, before you have any assurance that a transaction will actually go through. In some countries, such as the USA, buyers rely on insurance rather than having the legal title checked. This will mean that any problems won’t disappear or be corrected – only that any financial loss which you might incur would be covered.
If you are buying and selling and need some advice on how to make sure it goes through as smoothly as possible, call one of our conveyancers today. Alternatively you can visit our Residential Conveyancing services page here or complete the form linked here and we will call you back.
For further information on the government’s latest consultation, go to https://www.gov.uk/government/news/government-acts-to-improve-the-home-buying-process
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