Gazumping Definition- Just when you thought you had bought the house of your dreams
Gazumping occurs when a seller accepts a higher offer for his house, after already having accepted an offer from another purchaser. Not very ethical, but not illegal in England and Wales. Until contracts have been exchanged the sale agreement is not legally binding. Once an offer has been accepted, either buyer or seller can pull out at any time until the exchange of contracts.
If you are a seller you naturally want to get the best possible price for your property. In a strong market, prices may be rising and you may get several people interested in your property. Even after you have accepted an offer, then you will inevitably be tempted if someone comes and makes another offer at a higher price.
So if you are a buyer how can you avoid being gazumped. In reality your best chance is to make a period of exclusivity a condition of your offer. This will reduces the chance of someone gazumping you. During this period the seller should agree to take the property off the market and give you a fair chance to get to contract exchange. However this would still not stop someone who has already seen the property putting in a higher offer.
A few Estate Agents do offer an ethical approach and insist that the seller signs an agreement to turn down any offers after one has been accepted.
You could also consider a pre contract deposit agreement. This involves both parties paying a deposit of 1.5 - 2% of the agreed purchase price to a stakeholder, and signing an agreement saying that contracts will be exchanged within four weeks. If one side withdraws from the sale, the other party receives both deposits. If you are a gazumped buyer you therefore get some compensation. This is not a water-tight agreement as either party can pull out if they are willing to lose the deposit, but it does reduce the risk