Housing minister Grant Shapps has ruled out taking any action to stamp out gazumping.
He was replying to a question from Gordon Henderson, Tory MP for Sittingbourne & Sheppey in Kent.
It is not known whether in the current market gazumping is a problem in his constituency or what prompted the question.
He asked Shapps in the Commons whether he “plans to take steps to mitigate the adverse effects of the practice of gazumping in the housing market”.
Shapps replied: “Home buyers and sellers in England and Wales are free to choose from a range of options, including some which give more certainty that their transaction will be completed.
“These include ‘lock-out’ agreements, where the seller enters a binding agreement not to accept another offer within a certain period; ‘option to purchase’ where the seller grants the buyer a binding option to purchase the property at the agreed price within a set timescale; ‘conditional contracts’, where buyer and seller enter into a contract as soon as terms have been agreed, subject to certain conditions being satisfied; or ‘costs guarantee’, where both buyer and seller agree to pay the other side’s costs if they withdraw from the transaction.
“Given the flexibility of the present system, we have no plans for reform in this area at the present time.
“Home Information Packs, introduced under the last administration, were originally supposed to help tackle gazumping.
“In practice, they did no such thing as they were not trusted by buyers, and merely deterred sellers from putting their homes on the market. This is why the Coalition Government has abolished the requirement to have a Home Information Pack, saving home buyers and sellers from the unnecessary regulatory cost.”
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Comments
I don't think the issue here should be so much about gazumping and new reforms on it so much as that there needs to be new reforms on house buying protection in general.
However, in order to solve the gazumping problem all you have to do is take a leaf out of the Scottish Governments book. As we well know, In Scotland the law states that once a solicitor accepts an offer from a buyer, he/she is bound by law not to accept any further offer from anyone else, thereby protecting vendors from gazumping.
My first question is very simple - THIS WORKS!!!!!!! So why aren't we doing the same thing here?
Let me just put all of this into perspective.
In the last 5 years I have bought 1 property and I am, at present going through the purchase of my second. Yet - I have had to deal with 3 purchases and 2 sales transactions; the first flat I went to buy, the vendor decided she didn't want to sell the place anymore a week from completion - total cost to me? 6 months and £800. I then purchased another flat and although it took a year to complete, there we no hiccups. I then went to sell this property 4 years later and as with the first flat, the lady purchasing my flat decided she didn't want to buy it about a week from completion. Total cost to me - 6 months and £500. The next person bought without hiccup. I honestly thought that the experiences of buying and selling couldn't get any worse - I was so wrong.
My grandmothers property had been on the market for 2 yrs. 4 months ago we accepted an offer from a Doctor of all people and this was set to complete this week. Myself and my father had been looking for a house to buy over the last few months so when we found the perfect place we jumped at the opportunity and our offer was accepted. Everything looked like it was going to go through this week, the sale of my grandmothers property releasing the money to purchase the new house. Then on Monday we had a call from the estate agent that the purchase of my grandmothers bungalow had fallen through. Our purchaser was spotted by our estate agent coming out of another estate agents in the same street. When confronted and asked what he was doing, he came clean and stated that he had bought another property 100 yards down the road, £10K cheaper which was his preferred choice. He had purposely not told our estate agent just in case the sale of the place down the road fell through so he had our property as a backup. He withdrew from the purchase of my grandmothers bungalow and that was that.
I was livid.
We have had to re-mortgage my fathers current property at a cost of £250 in interest every month in order to keep the purchase of this other house going. If we had decided not to do this and let the purchase of our new house fall through it would have cost us nearly £2000 in surveys, mortgage admin charges and solicitors fees. It may take another year to sell my grandmothers property potentially costing me £3000 in interest on the loan against my fathers house. And this is all because of an immoral purchaser who cares nothing for the trouble he has caused.
May I also add that in all of these passed transactions, not once did either my solicitors or Estate Agents ever mention any of the protection methods mentioned in the above article such as conditional contracts or options to purchase.
The second question I am asking therefore is - Who is protecting us?
My estate agents never did, neither is the government.
It's about time the WHOLE system was reformed.
The current system affords NO protection to people unless they or their solicitors / estate agents are up on the methods available mentioned above. If other countries offers protection systems then why can't ours?
And people who suggest this problem is not rife are either blind, ignorant or kidding themselves.
I do not jest when I tell you that a colleague at work came into the office yesterday and told me he and his wife had just had received exactly the same news from their estate agent as we had. Yes - their buyer had bought somewhere else and caused their purchase to fall through, only they were not so fortunate as to have another property to re-mortgage. They have decided the stress and money just isn't worth the risk to their health and they have taken their property off the market.
This is unacceptable and something needs to be done about it, it's time the government listened to what it's people ask for.
Well apparently some agents do advertise it:
www.rightmove.co.uk/property-for-sale/property-35528254.html
"We are acting in the sale of the above property and have received an offer of £395,000 on the above property. Any interested parties must submit any higher offers in writing to the selling agent before exchange of contracts takes place."
As a buyer (not of this property), and having come from a system whereby sale is binding (conditionally) upon sellers acceptance (Australia’s system), this infuriates me.
In my opinion the system in the UK is largely inefficient due to ability for either party to withdraw before exchange. Sure you can enter additional agreements as the author suggests, but it often weakens your position as a buyer, and sometimes perhaps as a seller. More failing sales means money for surveyors, brokers and solicitors businesses. The agents lose out if paid on commission. There wouldn’t be gazumping and gazundering if offers were legally binding.
This is not to mention the additional stress, issue with chains, families being out of a home, additional costs, uncertainty etc, there is no protection for buyers, sellers or as it may seem agents. You might get the luck of the draw and benefit from it, all parties on the whole lose.
To Harsh But Fair, yes, you are absolutely right. Hence the agent is not creating the 'gazump' is he? That was my point. The offer (all offers) must be put forward unless expressly instructed by the vendor not to do so.
To PeeBee, as far as a buyer not knowing an offer, if a buyer comes in for a property and offers full asking price and the agent has to go back to the buyer with the news his offer is rejected, the buyer can pretty much work it out for himself what he has to do. The offer, if he wants to make it and he wants the property enough just simply has to be over the asking price. Doesn't it? Or am I being stupid here?
In no way do I insinuate 'gazumping' is rife, certainly not in the current market. I have only known it twice in the past 12 months.
I also said I don't know any agents who would be 'HAPPY' to reset the sales clock for £150.
If you know agents who would be 'HAPPY' to wait an extra 10 or 12 weeks to get an extra £150 then bully for you and them, they must be really skint or miserly people, these agents you know. And in round terms (not specific) if this miserly agent or agents was able to pull this stunt off 20 times a year he has an extra £3,000 at the end of that year. Let me assure you, it wouldn't pay for the grief and the nasty phone calls the imaginary agent would get as a result. The imaginary agent would be better off closing one more good deal, getting it exchanged quickly and getting his £3k that way.
Once again I reiterate. Agents do not seek, condone or promote 'gazumping' it simply isn't in our interest. If the situation happens it is because we work entirely within English Law and put the high offer forward. Then, quite rightly, both buyers and the seller have choices to make. That is the notion of a free market and it will sell for what it is worth.
Funny how other threads are about over valuing though, isn't it? Irony, lol
@RightmoveAbusesAgents
Whether the agent is happy about re-setting the sales clock or not is irrelevant. If it means achieving a higher price for his client, then that's what he is duty-bound to do. End of.
This one intrugues me. Annoys me, in fact.
What annoys me more than anything is how many people - Agents included - do not know what a 'gazump' is.
Firstly - let's not forget that for a vendor to accept an offer on their own property is not illegal - whether or not another offer has been previously accepted. Just as it is not illegal for a buyer to threaten to withdraw unless the seller reduces the agreed sale price.
On the comments below:
'Hawkeye' - nope - 'Ironic!' got it right. Think about it for a minute...
'fairagent' - NO-ONE 'practices' gazumping for heavens sake. With respect, a ridiculous statement to make.
What is a worrying inferrence here is that, as an Agent, you seem to be saying (please correct me if I am wrong...) that you are not giving your vendor the opportunity of considering - and accepting if they so wish - an offer for their property even after one has been accepted, then you are actually breaking the Law (The Estate Agents Act 1979) and you should not be practicing as an Estate Agent. I sincerely hope that this is not the case.
'RightmoveAbusesAgents' - I am sorry to tussle with you once again, but 'naughty' buyers don't practice gazumping, and 'greedy' vendors do not perpetuate gazumping. If a buyer wants something, then they will try to buy it... whether or not someone else already has made an offer on it. IF they make an offer, then it is the VENDOR'S decision what to do with that offer. The buyer should not know what the previous accepted offer was.
There are three parties involved in the scenario - Agent, buyer and seller - and each play their part. We are talking here about one-off situations, that only occur in certain marketplaces and then only in certain market conditions - yet your words insinuate that gazumping is rife.
You say that you don't know any Agent who would wait an additional 12 weeks for an additional £150 on a Fee. I know LOADS who would gladly wait for such an increase; and if you were to multiply that single 'bonus' fee by a factor of say 20 in a year then I would show you a multitude of Agents who would be happy that their office electricity bill for that year was paid for by the increased revenue!
Jeez - and I came back from holiday in a good mood...
Estate agents do not practice gazumping, buyers do.
The law is clear, all offers must be put forward.
Estate agents do not perpetuate gazumping, sellers do.
If an owner accepts a higher than asking price after the sale is already agreed it is the owner causing this situation.
I don't know any agents who enjoy this as it resets the selling/buying clock back to start and the commission the EA will get is then a longer wait.
Not to mention that at 1'5% every £10k is worth £150 to the agent. I don't know any agents who would be happy to reset a sales clock and wait a further 6, 8, 10 or even 12 weeks to get an extra £150, but an owner will do this to get an extra £10k.
Once again I say. Estate Agents do not cuase gazumping, naughty buyers and greedy sellers do.
As agents we all enable gazumping as we are legally bound to report all offers. As long as our fees are tied to the sold price we are more so 'guilty' by association; but this is not about honour, its a fundamental flaw in our industry's DNA.
Sellers are free to sell to whomever they wish and buyers are free to buy at whatever price they wish; Its called a free market and unfortunately gazumping is inevitable.
Shapps can talk all he likes about the options available but it's all white noise because in reality there is no contractual scenario where any of them are workable. Our hands are tied and its unrealistic to rely upon the goodwill of vendors.
Until the LAW prohibits any offers after an prior one has already been accepted then gazumping will remain.
Shapps is so out of touch with reality. HIPs did not deter sellers, but it did give them a cost to putting their house on the market, unlike the puny amount a useless EPC costs.
No costs have been saved, just moved to the buyer again, they missed the chance to make them work for the good of all. Too quick to deliver something and like much of what they do, without proper research. Good at negative without a better idea, these are the country’s leaders.
Fair agent “I don't practice gazumping” How not exactly, agree you can cut it down, but what do you do if you get a higher bid then, not tell the seller and break the law?
Hawkeye;
"The Scottish system works for the seller but how many buyers lose out on their survey costs etc up to when they put in an offer only to find it is no accepted."
How many? Practically none.
Haven't you heard of Home Reports? Single Surveys? Offers made Subject to Survey?
@ironic
Surely you mean 'priced properly' and not 'overpriced'.
@fairagent
What drivel you 'dont practice gazumping'. If a higher offer comes in you MUST put it forward as the consequences of not doing so will get you sued and you will lose.
The Scottish system works for the seller but how many buyers lose out on their survey costs etc up to when they put in an offer only to find it is no accepted. It is the buyers here who bleat on about gazumping. If a punter does not offer the price then he can be beaten by a higher offer. If you interpret a higher offer which is the asking price or close to it but not in excess of then it is absolutely not gazumping. A gazump is an offer in excess of the offering price when a less than offering price has previously been accepted. All offers are subject to contract in any event so all the moaners can bugger off in my book. Pay the price or suffer the consequences.
Anyway now is not the time to discuss gazumping as a buyer will generally not pay the price in any event so this is a non starter. As the twit says there is enough flexibility in the system but what is needed is a solicitor to get finger out.
Gazumping! That would be a nice problem to have.
What are the "adverse" effects of gazumping?
I agree with you Paul.
Stopping gazumping and turning towards a more Scottish system would make things much fairer all round.
I don't practice gazumping and find that making sure everything has been gone through with both purchaser and vendor in advance means that most of the time the is no pull outs apart from some serious issue coming up on the survey.
Ironic...An under valued property has just as much chance of falling through, so that is not a valid argument.
I think we should be moving more towards the scottish system with my prefered option being the 'conditional contracts' agreement. But there must be penalties for people pulling out to make it work and it must be done for all properties and not for a few for it to work.
If agents over priced property this would not be a problem.