Previously published in May 2010, now re-written and updated. All advice and opinion on here is given in good faith and based on the Laws and code of practice from The Property Ombudsman Scheme that apply in England Wales, as we understand them.
Gazumping. What does it mean, what are the Laws against it and who is at fault?
The chances are that you have landed on this page after a search because you have just been gazumped or, someone you know has been and you/ they are angry, hurt, upset and want to sue the backside off someone. In short, you want payback! But who is at fault? The agent? The owner of the property? The other person who offered? All of them? You even?
So what is ‘Gazumping’. In simple terms it is when a seller, having previously accepted an offer subject to contract, from a buyer then goes on to accept another offer from a different buyer before contracts have been exchanged. Wikipedia has a rather short article on the subject here .
Why does it happen? Apart from the main reason (the way that we convey property in Britain allowing gazumping to happen); there are usually a number of reasons cited but, the principal ones are:
- The original buyer upset the seller in some way, causing them to consider other offers (time delays, unreasonable demands, rude about the property; the list is almost endless)
- The seller was simply greedy
- The seller has a legal obligation to obtain the highest offer for the court (probate sales and repossessions for example)
- The seller made it clear that other offers would be considered up-to exchange of contracts but this was ‘forgotten’ or not believed by the original buyers or; this information was not communicated to them effectively/ at all.
Is it the estate agent? The first port of the blame call is usually the estate agent. It was him, after all, who encouraged or submitted the offending offer that caused you to be gazumped wasn’t it? In fact, except in exceptionally rare cases, it is never the agents fault.
Probably the main cause of the ire directed at agents on these occasions is that very few people understand an agents responsibilities in Law so it is worth stating them clearly here. The agent works for the seller and not the buyer. The agents duty in law is to achieve the best offer possible and to act on the sellers instructions; even when those instructions appear morally questionable (as long as those instructions are legal). An agent would be in a world of trouble in the courts if he disobeyed the legitimate instructions of his customer, the seller, no matter how morally bankrupt those instructions appear.
If an agent is actively trying to increase the selling price of a property or, is continuing to submit offers after an offer has been accepted, subject to contract (STC) then, that agent is doing what the owner is paying him to do and, equally important, what he is obliged to do in Law. Remember, when you come to sell, he is (or damn well should be) doing the same for you.
The Law of offers. In simple terms, if an agent receives an offer from anyone for a property he is marketing, he is obliged to pass it on ‘as soon as is reasonably practicable’ and to then confirm this in writing; usually on the same day, to both the seller and the buyer. This applies right up to the point of exchange of contracts and/ or even if the property has been ‘withdrawn from marketing’. The only time an agent is not required to pass on an offer is if he has written authority from the seller authorising no further offers to be put forward or, no offers below (or above) a certain level are to be submitted. It is this often little understood part of an agents legal obligations that can understandably cause great upset and anger.
The seller? To make it clear, the only person who can gazump someone is the owner of a property; the seller (also known as ‘the vendor’ by some of us older estate agents). The seller is the only person who has any authority to accept or reject an offer. An agent MUST pass on all offers (see above) but it is the owner who decides whether to change buyers and accept another offer.
In the sellers defence, as I said above in ‘why does it happen’, the original buyer may have caused the seller to lose patience or trust in the original buyers or, there may be other reasons why the seller has accepted another offer, subject to contract.
Taking a property off the market. A much misunderstood phrase, often, by agents themselves. When a property has a sale agreed, subject to contract, on it an agent must check whether the owner wishes to continue marketing. He must then inform the potential buyer if the seller is going to continue marketing in writing of this fact. This does NOT mean that the agent is released from his legal obligation to continue putting forward any offers he may receive after this point though. For example; Mr Corbyn views a property on Monday and makes an offer which is accepted; the owner instructing the agent to cease marketing. The agent immediately marks the property as SOLD stc on his boards in his window and on the internet as instructed. He then refuses to arrange viewings for Mr Cameron who rang in just afterwards to have a look around. However; Ms Sturgeon , who saw the property on the Saturday in the previous week but has been away, phones up on Tuesday and makes a higher offer. The agent is still legally obliged to tell the owner of the offer and it is then up to the owner whether he accepts or rejects the new offer. See my blog “Why can’t I keep my home marked as ‘for sale’?” on the subject here
IF the owner accepts the new offer, the agent is again required to inform the previous buyer of what has happened. The ‘gazumped’ buyer then, equally, has the right to make a better offer. And so the process continues. English conveyancing law…. Guaranteed to cause heartache and create problems. In short, an upsetting mess for everyone involved (although we at PDQ have a solution which helps to avoid and reduce problematic issues. See Best and Final Offers further down this page)
Subject to Contract (STC). This is a term I have referred to in this article a few times and I think it is worth offering a very brief explanation of why it is used and what it means. In English conveyancing Law, a property is always said to be sold, ‘Subject to Contract’ until contracts have been exchanged. What this means is that an offer to buy has been made at a price that is acceptable to the seller BUT, as the phrase implies; this price and the whole purchase itself is subject to an acceptable signed contract being offered and received (exchanged) by the two parties (the buyer and the seller). Up to exchange of contracts, both parties are free to pull out of the transaction, buy something else or, accept an offer from someone else.
BEST AND FINAL OFFERS – (PDQ’s preferred solution for dealing with multiple offers on a property)
WHAT HAPPENS IF OTHER PEOPLE OFFER ON THE PROPERTY I WANT? – Often the most attractive, well-located or keenly-priced properties will attract strong interest and offers from more than one person.
When this happens at PDQ, we usually advise our owners* to follow a procedure that we have found to produce the best and fairest results for our customers and buyers alike. We call this process ‘best and final offers’.
- If we are instructed to go to best and final offers by an owner, we will ask everyone who has made an offer or, indicated they may make an offer, to submit their ‘best and final’ offer to us at PDQ, along with details of any other property sale or finance that might be involved in any successful purchase. This offer is private between you, PDQ and the owner. No other potential buyer will know what you have offered nor will we tell you the level of other offers.
- If you feel you have already made your best offer and don’t wish (or are unable) to make a better offer at this stage, we will inform our customer that the existing offer is your best and final offer.
- Our customer will then be asked to make a decision having considered all of the offers on their individual merits.
- Once we have spoken to the successful bidder, we will instruct solicitors and will inform the other bidders that they have not been successful.
* We will always offer the advice we believe is in our customers’ best interests which may differ from the ‘best and final offers’ solution and, of course, our customers are free to instruct us to follow other methods of deciding which they consider to be the best way to reach a satisfactory conclusion for them right up to the point of exchange of contracts.
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About Chris Wood: Chris is an estate agent with over 25 years of property experience. His business, PDQ Estates Ltd is based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco. A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers. Chris is on KloutLinkedIn Ecademy Facebook and Twitter Chris is a former Army reservist. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.