Gazumping: Difference between revisions

{{RefimproveMore citations needed|date=January 2010}}

'''Gazumping''' occurs when a seller (especially of property) accepts ana oralverbal offer (a promise to purchase) on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orallyverbally agreeing to a lower one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase.<ref>{{cite web|title=Home Buying Guide: Gazumping & Other Problems|publisher=home.co.uk|date=|url= http://www.home.co.uk/guides/buying/gazumping.htm|accessdate=31 March 2010}}</ref> The term ''gazumping'' is most commonly used in the [[United Kingdom|UK]], [[Ireland]] and [[Australia]]Ireland, although similar practices can be found in some other jurisdictions.

With buoyant property prices in the [[British residential property market]] of the late 1980s and early 1990s, gazumping became commonplace in [[England and Wales]], because a buyer's offer is not legally binding even after acceptance of the offer by the vendor. This is because, by s.2 of the [[Law of Property (Miscellaneous Provisions) Act 1989]] and in order to prevent [[dishonesty]], aA contract for the sale of land must be in writing, a requirement of [[English law]] that dates back to the [[Statute of Frauds]] of 1677 and is restated by s.2 of the [[Law of Property (Miscellaneous Provisions) Act 1989]]. This requirement was originally intended to promote good faith and certainty in land transactions and to prevent [[dishonesty]].

When the owner accepts the offer on a property, the buyer will usually not yet have commissioned a building survey nor will the buyer have yet had the opportunity to perform recommended legal checks. The offer to purchase is made "subject to contract" and thus, until ''written'' contracts are exchanged, either party can pull out at any time. It can take as long as 10–12 weeks for formalities to be completed, and if the seller is tempted by a higher offer during this period, it leaves the buyer disappointed and out-of-pocket. Asking price has no impact on whether a property haswill beenbe "gazumped", but location does: it is more common in London and the North East.<ref>{{cite web|title=Gazumping|url=https://www.emoov.co.uk/news/gazumping-falls-across-uk-london-retains-gazumping-capital-crown/|website=emoov|date=20 AnyNovember offer2018|publisher=emoov}}</ref> over aAccepting previousany offer thatover isa subsequentlyprevious acceptedoffer is known as gazumping.

When property prices are in decline, the practice of gazumping becomes rare. The term '[[gazundering]]' has been coined for the opposite practice, whereby the buyer waits until everybody is poised to exchange contracts before lowering the offer on the property, threatening the collapse of a whole [[Chain (real estate)|chain of house sales]] waiting for the deal to go through. '[[Gazanging]]' describes a similar situation, wherewherein a seller pulls out of a sale entirely, expecting to get a better asking price or offer once the market improves.

[[Scots law]] and practice makes the problem of gazumping a rarity in Scotland. In the Scottish system of [[conveyancing]], buyers either obtain a survey prior to making a bid to the seller's solicitor or make an offer "subject to survey". Sellers normally set a closing date for written offers, then provide written acceptance of the chosen bid. The agreement becomes binding when a seller's solicitor delivers a signed written acceptance of a buyer's offer. Should the seller attempt to accept a higher bid after the contracts have been legally finalised by a written offer and acceptance, their solicitor will refuse to act for them, as this, according to the [[Law Society of Scotland]] code of practice, would be professional misconduct. As in England, all contracts for the sale of land must be evidenced in writing, signed by or on behalf of each party. In Scotland, the parties' solicitors sign on their behalf, unlike in England, where buyer and seller both sign a contract which has been produced in duplicate form, with the duplicates then being exchanged to effect a binding contract. It is often wrongly claimed that gazumping is a rarity in Scotland because it is said that an oral agreement on a property deal is legally binding; while the law on contract differs from the law in England, the rarity is due to the different system of conveyancing.

In Scotland, however, an estate agent, acting on behalf of the seller, can initiate instances of another form of gazumping. Once a closing date for written offers has been reached and an estate agent has given an oral acceptance of the chosen bid, the estate agent can then attempt to induce a bidding war between the successful buyer and a rival, who may be fictional, in an attempt to increase the offer made by each party. In such circumstance, there is little recourse for a successful buyer who, despite having been informed orally that their offer has been accepted, is then informed orally that their offer has been rejected in favour of a higher bid. Such situations only occur at an early stage of the conveyancing process, prior to any written acceptance of an offer being given by the seller's solicitor. Often they result from the legal requirement on the part of estate agents to advise a seller of any higher offer received prior to written confirmation of an orally accepted offer being given, including those received after a closing date.

In a falling or depressed market the term "gazunderingGazundering" refers to the practiceis wherebywhere a prospective buyer (especially of a property) makes an oral offer (a promiseoffers to purchase) onbuy the property at an agreed price but subsequently threatens to withdraw the offer unless the seller agrees to a lower price. There are two circumstances where this happens:

*[https://web.archive.org/web/20070213145625/http://www.themovechannel.com/guides/Buying/Success_&_failure%26_failure/What_is_gazumping/ TheMoveChannel - What is gazumping?]