Gazumping is back with a vengeance in the London market as the capital increasingly does its own thing – divorced from the rest of the UK.
Agents are reporting that cash-rich buyers are piling into bricks and mortar, partly fuelled by a desire to beat the April 6 stamp duty deadline when £1m-plus houses will attract a 5% duty, and partly because their bonuses have landed.
Buying agent Jack Greenwood, of Homes One, said the London market had reached a ‘tipping point’ where buyers could no longer afford not to have their own representation.
He said: “Central London property has increasingly become a global commodity. Not only have prices and demand gone up, but supply has actually gone down.
“To make matters worse, in some parts of London almost one in four properties is now sold ‘off market’. The net result is huge competition for the best properties.”
Peter Rollings, chief executive of Marsh & Parsons, said: “With over 14 buyers registering for every property placed on the market in central London, competition among buyers has undeniably heated up.
“The arrival of the bonus season, and those hurrying to buy high-end property before the stamp duty hike in April, have bolstered demand.
“Bidding wars are emerging on desirable prime homes, and there has been a noticeable increase in gazumping. Vendors are now in such a strong position that many are accepting bids higher than initial offers from interested rival parties, particularly in areas like Kensington and Notting Hill.
“Buyers can no longer afford to drag their heels, and must move quickly to ensure they secure their desired property.”
He added: “There are a lot of people who do have cash to invest, who are piling it into bricks and mortar.
“Activity in the London property market is being buoyed by the substantial demand from UK and international cash buyers, who are immune to the current mortgage finance famine and are triggering stiff competition for the limited stock of prime properties on the market.
“In the capital, the days of gazumping have returned with a vengeance, and more and more properties are going to sealed bids. Anyone who thinks they can bid way below a sensible asking price is dreaming.”
Rollings was speaking after the latest figures from the Council of Mortgage Lenders showed that house purchase lending in January slumped 26% to £4.6bn, and 29% by number of mortgages.
Just 28,500 mortgages for house purchase were advanced in January. This was down 13% by value on January 2010, and down 12% by number.
The CML said the fall in lending was far greater than the seasonal norm.
First-time buyers took 10,500 loans worth £1.2bn in January, down 28% by number and 29% by value on December.
Home mover loans fell 29% by number, from 25,400 to 18,000, and 28% by value from £4bn to £2.9bn month on month.
Rollings said: “These numbers keep getting worse despite two years of record low interest rates. Nobody is calling for a return to the irresponsible lending of a few years ago, but the choke on mortgage finance is stifling buyers who want to take advantage of the value there is in much of the UK property market at the moment.”
Last week, the RICS said that house prices were falling in all parts of the UK apart from London.
Comments
Gazumping here Gazumping there. I think the issue is and should be once an offer has been accepted by the vendor that should stand.
It is basic contract law offer and acceptance.
Why should the sale of land differ from anything else.
Thanks for your clarification PeeBee.
The big point I take from your message is that being gazumped is a risk that a large proportion of buyers are unaware they are taking. This risk is not painless or costless either.
I also take some re-assurance from you pointing out that informing the original bidder of the new offer is good practice but I suspect there are cases around the country where it is not standard practice? Do you think there could/should be legislation to ensure the original buyer is made aware of any subsequent counter-offers?
It sounds fair in practice but it does come with an erosion of the property rights.
Rhys: Thank you for reposting, clarifying that you are, I gather, a prospective buyer rather than an Agent.
Firstly, for your benefit (someone earlier said that those in the business need not be told what the terminology actually means - this clearly is not the case for you), the phrase 'gazump' refers to an offer which is tabled and accepted after another has also been accepted, on a figure which is HIGHER than the asking price. I am sure you will agree that this is not a common occurrence in the current market - although maybe in certain locations such as London it may still be happening.
In many of the instances you will be referring to, offers will have been tabled, and accepted (...often reluctantly...) by vendors who originally expected higher amounts. Not only is this NOT a gazump; it is actually simply an situation waiting to happen, and it does quite often - even in a poor market.
Buying a house is a very fine judgement. Offer too low - you risk either having the offer rejected in favour of another, or even if accepted, a higher offer being tabled. Remember, there are several parties involved in this process; the vendor; the original offerer; the higher offerer; and the Agent. The latter is required BY LAW to forward each and every offer made for the property to the seller, up to the point of exchange of Contracts, at which point the sale (and purchase...) is binding.
A buyer runs the risk, whenever they offer less than the Asking Price, of another party showing interest in the property and potentially offering a higher amount.
Dependent on the sum involved, and how far the sale is down the line toward exchange, the vendor may well be tempted enough by the new offer to switch buyers.
IF the vendor instructs the Agent to accept a higher bid from another party then the Agent must do as the vendor tells them. In many instances, the Agent will recommend seeking best and finals, or at least offering the original buyer the opportunity to increase - but sometimes the seller simply says to go with the new buyer. Whatever the vendor says, however, good Agency practice is to advise the outbid party first in order to give them opprotunity to counter, rather than go back and tell them the property has been simply sold from under them, as you intimated in your post.
Like I said before, it is a hard judgement to make. For all you know the property is on the market at ten or twenty grand more than it is 'worth'. But the old adage 'if YOU want it, someone else probably will as well' comes into play with houses, I am afraid. Don't be afraid to make an offer - just be mindful of what I said above - that the lower it is, the more chance you have of being outbid during the process.
Hello PeeBee,
Thanks for your comments. Just in case there was any misunderstanding, I'm actually not an agent and my interests are concerned from the buyers point of view.
I agree with your "best and finals" point and that an agent (at least one representing the seller and being paid by the seller) has to achieve this. The part of the sale I thought could be improved upon was that most often the gazumping is done without informing the original party that has already made the offer. So sometimes this original party can be thinking they have the house and then have the foundations pulled from under their feet. I was just wondering why there isn't a more transparent way for the original party that has made an offer to be immediately informed of the counter offer. If this was the case then they may wish to better if it which would actually achieve a better price. In effect, if this were to happen then it becomes almost like an auction process. Of course I think that point i) should be maintained to avoid any losses by a party that has made a formal. A party that has made an offer should not be made out of pocket for having done so. There shouldn't be a price to pay for an unsuccessful bid. If this were the case it would damage the industry.
Is this in line with your thoughts?
"The final part of the deal process seems to lack a more robust structure." Must I remind you that current legislation allows this to happen. Must I also remind you that this is what you as an Agent are employed by the seller for - to achieve the best possible price for the property. An accepted offer is NOT a Contract. The buyer can walk away at any moment in the process up to exchange - why is THIS not on your list of suggested 'fixes'?
Rhys Davies: In response to your suggestions:
i). YOU agree that will all the lenders, then, and I am certain that EVERYONE here will applaud you!
ii). Sorry - I would expect EVERY Agent faced with this situation to request BEST & FINALS from all offerers. You don't?
"The final part of the deal process seems to lack a more robust structure." Must I remind you that current legislation allows this to happen. Must I also remind you that this is what you as an Agent are employed by the seller for - to achieve the best possible price for the property. An accepted offer is NOT a Contract. The buyer can walk away at any moment in the process up to exchange - why is THIS not on your list of suggested 'fixes'?
The big problem is that gazumping occurs without it ever being expected and the consequences can be painful for the potential buyer. The final part of the deal process seems to lack a more robust structure. The two main concerns are
i) costs incurred (e.g. survey etc)
ii) they actually miss the chance to buy what could have been their ideal home.
If there was a more open culture where the vendor communicated with all bidders then we can respond to the points above:
i) The ultimate buyer then purchase the survey from the original intended buyers thereby compensating them for any loss
ii) all involved parties do have a second chance to purchase or to increase their bid. This could be a little untidy but at least it's open and transparent.
rantnrave: "Call me paranoid or whatever..."
Okay - you're whatever! ;0)
Bud - PLEEEEASE don't go all 'seasonally adjusted' on me! Trust me, there is NO NEED for any of that - the housing market is adjusted DAILY by those who make it a market - the buyers and sellers!
Pee Bee - the latest Halifax data saw house prices fall from 161,211 to 161,183. Not a huge amount by any means, but presented as an increase of 0.3%. The reason for this statistical anomaly was the seasonal adjusting. Fair enough some might say, but there was significantly more adjusting done than for the corresponding month in previous years. Still, this is an improvement in January, where a small fall in non-seasonally adjusted terms was presented as a 0.8% increase! The headline Halifax figure is still running about 1K above the non-seasonal figure, suggesting they need to factor further falls in their data just to get back to the non-adjusted figure.
The other indices have in recent months also revised down the figure from the previous month or even that from a year earlier in a similar manner. Call me paranoid or whatever, but these 'adjustments' have in every case kept a monthly fall below 1% or prevented a year on year figure going negative.
Experts on the property market may be found in a variety of places
The first place to look is your local pub, as the man in the pub seems to know more about property than me and I've been at this for over twenty years
The next place is the hairdressers, - see pub explanation above but with purple rinse instead of lager
Next is "my mate says" he or she knows all there is to know about the property market
Next is, "I know what I'm talking aboutm I've moved three times in the last twenty years". This person obviously sells more houses than your average agent in the present climate
You could always ask the stupid woman on the other news story who looks at Rightmove at 4am in the morning as she has nothing better to do
Then there are the journalists out there who ring their mate in the local agents for the latest
Or perhaps if you really want an expert speak with Peter Bolton King - although that is questionable these days (sorry Peter)
After that, I have no more suggestions as to whom you should ask for advice - maybe, just maybe some of the experienced voices on here do know a thing or too about moving house and prices etc
Is there an expert on hand to explain how these agents have actually managed to undervalue the properties in question.
rantnrave: Hello again, Sir! This is the beauty of the press - we all read, see or hear what we want to; we all take from what we read, hear or see what we want it to say!
I was being only a tad sarcastic in my comment to Steven, you appreciate.
Why all the conspiracy theory shenanegans? What evidence do you have of house prices being artificially massaged upwards?
We CERTAINLY never see it on here... and if you are right, Henry Pryor, Miles Shipside et al better dive for cover if they see unmarked cars with blacked-out windows bearing down on them!
Pee Bee - If the HPC lot are cherry-picking their data, this has to be put in the context of the behaviour of those behind the major house price indices in recent months.
According to headline figures since the new year, HPs seem to be stabilising or very gently trending down. However, higher seasonal adjusting than in previous years has been applied and substantial revisions to the previous month's figures.
I could go on to bore everyone with the finer details, but it is worth bearing in mind that numerous vested interests in seeing high house prices have been substantially massaging recent data.
Steve M: Now according to my contacts at HPC, you lot usually just ignore stories that don't suit your argument. Pretend they were never published, and wait for the next fable of doom and gloom to emerge before barking at the moon.
Are you a new hatchling or something?
GUZUNDERING
-----------------------
Sorry but with the way prices are going down and too few buyers I thought it was guzundering which is mainstream.
To suggest guzumping in this collapsing market is common is a complete joke. Big thumbs down.
What next, house sales at record levels?
Bradford is actually in Devon. A good few hours south of the Midlands
Pleeeeeease Ros,
I support most of what you do, BUT the heading 'Guzumping back with a vengeance' ?
Is it not a 'misrepesentation' of the facts, add the words 'in London' and none of us would be that surprised.
By the way all these explanations regarding what is and what is not gazumping - all experienced EA's know exactly what it means.
I'm good with that! Thank the gods for SatNav!
Let's just pretend that you were thinking of Stratford and they'll be none the wiser...
Trust me Sibley, whatever you said would only be repeating what my family has said to me since I was in school! Still trying to figure out why I thought that's where it was.
"...I thought Bradford was in London."
I hope you realise it's taking every ounce of what little humanity I possess not to comment on this...
Must be honest my geography SUCKS and I typed that before looking at Google. I thought Bradford was in London.... I'm actually in the Midlands. Sorry to disappoint you my sweet.
I subscribe to the theory that the direction I am facing is north and as long as I know where I am the rest of the world should move itself around me. Never happened, but still hoping! (I do use a compass for sales details though)
Country Lass: seems like we are closer than I thought.
I am also "...a few hours north of there."
Our respective other halves better get watching our movements! ;0)
SIBLEY- Any inner city UK wide not just poor old Bradford!
Sibley m'dear, try a few hours North of there....
Ho-hum... here I go again!
AT THE RISK of upsetting those HomeBuyer Agent chappies and chapesses again...
"Buying agent Jack Greenwood, of Homes One, said the London market had reached a ‘tipping point’ where buyers could no longer afford not to have their own representation.
He said: “Central London property has increasingly become a global commodity. Not only have prices and demand gone up, but supply has actually gone down.
“To make matters worse, in some parts of London almost one in four properties is now sold ‘off market’. The net result is huge competition for the best properties.”"
Now am I just being a bit thick here, or is this SCREAMING at me that, in fact, this should herald the NECESSITY to have a buyers Agent acting for you? One that will kick, fight, scratch and punch in order that YOU are the first one through the door; the accepted offer - and with a lock-out agreement to secure time to proceed without fear of 'gazump'?
Or are buyers' Agents just not good enough to cut the mustard in a sellers' market?
I'm just asking a question, not stating anything...
Feel free to tell us all, please.
"I should also point out that the majority of my clients speak English as a second or third language, and not always particularly well. I try to condense things as easily as possible, as it is normall a 12year old child doing the translating."
Busy in Bradford, eh?
Not in this neck of the woods
This is yet more vacuous nonsense. In my area of Barnes SW13 0 an area not usually noted for property being tough to sell - there has been a big surge in the last few weeks of property on the market. My guess is that the smarter agents can see the writing on the wall - i.e. what happens when Merve 'Behind the Curve' King finally gets up the courage to start moving rates to where they should be. They are getting in the laughable PR now trying to get as many sales done as possible while they still can. It is NOT the case that no one in London has a mortgage. As soon as those base rates get back to 3-4% the 90% of people on variable rate mortgages will be heading for the exits and gazundering is what we will be reading about more likely ....
Ye. Me and Jonnie? sounds like a Party!
I should also point out that the majority of my clients speak English as a second or third language, and not always particularly well. I try to condense things as easily as possible, as it is normall a 12year old child doing the translating.
It's the way I tend to describe it to most of my clients, especially when I am trying to explain to them why the property will not be taken off the market until contracts are exchanged, and that any other offers can and will be put forward until that happens.
I find it is the easiest explanation, and then gives me a 'defence' when they start accusing me of gazumping them. I agree that it is not in the strictest sense 'true' but it is an easy and simple version of the truth to give, without going into the details.
Suffice it to say GG I go through a lot of oranges...
just a little 'trussed-up' at the moment.
Old School Conservative MP then Sibley?
Sibley's... : Touche, mon brave!
Yes - the famous "Public Notices"... these are part of the papertrail that Lenders sometimes use in order to demonstrate 'compliance'. They are often published too late to be of any effect to the outcome of an ongoing sale - and in some instances when they DO generate interest, they are not acted upon.
Back to my point. The 'Law' surrounding 'gazumping' is non-existent. A seller under current legislation is at liberty to accept another offer from another buyer at any point up to the point of exchange of Contracts, as is the buyer free to withdraw from a sale to the said same point.
IF a buyer makes an offer of under the asking price, then they risk higher offers being made. The fact that a seller has accepted the offer does not bind them. The closer to asking price the accepted offer, the less chance of a higher offer being made in the period between acceptance and exchange - but it can and does still happen. What buyers have to realise, is that THEY are buying the property because they like it - it stands to reason, therefore, that OTHERS may share their like of the property.
Whether it is a reposession; deceased estate - or just 27 Acacia Avenue being sold by Mr & Mrs J Public, the rules are pretty much the same.
Gazumping!! Those were the days. These days I pick up the phone to be roared at by a man in his 50's saying 'Another QUALITY lead from Zoopla!!!', after which there is a pause followed by 'Do you take DSS?'
"There is no loophole. In fact, there is no 'Law' - other than the Estate Agents Act 1979, which (ineffectively) serves to ensure that the actions you describe should be the case in EVERY sale."
I had assumed that in the case of repos, EAs were legally beholden to the corporate vendor to ensure the best price was obtained ie 7/14 day Public Notice. Is this not over and above the EA act?
BTW Peebee, I haven't ignored your previous posts, just a little 'trussed-up' at the moment.
Gazumping is a word used, pretty much, exclusively by people who have been out-bid to try and demonise both the agent, and the person who out-bid them.
Horrible word, and there's no need for it. It's not illegal or immoral, and you show me a vendor who wouldn't accept the highest offer from a proceedable buyer.
CL: I am interested in the following phrase you use -
"For the non-Agents out there, that is not gazumping, apparently due to a loophole in the laws which means the Asset Manager (Bank's agents) and the EA have to prove they have done everythiing possible to get the highest possible price for the defaulting borrower."
There is no loophole. In fact, there is no 'Law' - other than the Estate Agents Act 1979, which (ineffectively) serves to ensure that the actions you describe should be the case in EVERY sale.
Gazumping? I certainy hope this is not a lame attempt to whip up a frenzy with the inappropriate use of terminology...
I wonder if Mr Rollins, or other senior member of M&P staff who has the authority to speak on behalf of the company would be kind enough to define what they are describing as a 'gazump'?
Why? Just interested...
You're lucky to see a few sales still well below levels of 12 months ago, and gazumping hasn't yet returned to the dictionary in the Midlands, and doesn't look like doing so for a year or two or three!
This is highly amusing I must say.
Gazumping. In this market. Hilarious.
Indeed the market is rising so fast that 100% mortgages can only be a few days away. Watch this space.
I'm not seeing 'gazumping' just loads of people bidding on repossessions, even when a sale is proceeding.
For the non-Agents out there, that is not gazumping, apparently due to a loophole in the laws which means the Asset Manager (Bank's agents) and the EA have to prove they have done everythiing possible to get the highest possible price for the defaulting borrower.
No gazzumping in Shoreditch which is on the central London borders but starting to see a few more sales enquiries.
When George Daws quoted dutch Auctions in the South West for Starter homes he was accused of trying to frigthen FTBs into buying.
'...particularly in areas like Kensington and Notting Hill.'
Jolly good, so that covers around 0.01% of the UK.
Can any EAs on here confirm whether they're seeing gazumping 'back with a vengeance' in their areas?
I'm suspecting that legions of cash-rich foreigners (natch) aren't piling into Doncaster.