Gazumping

Gazumping is the term used when a vendor agrees to an offer from one prospective buyer and then sells to another for a higher amount. This is fairly common in UK (not including Scotland), where it is responsible for ruining over 15% of property deals. The house buying process in Scotland does not allow either side to pull out of a deal without penalty once an offer has been made and accepted, and so gazumping is practically unheard of there.

However, the process for rest of the UK allows either party to amend or withdraw from a sale at any time before the exchange of contracts - when a sale is legally binding - which is usually up to 12 weeks after the acceptance of an offer. Vendors frequently cancel sales before contracts are exchanged and may take a property off the market altogether if they think they can get a better price later.

You can reduce the chances of being gazumped by encouraging a vendor to sign a lock-out agreement, where you have the exclusive right to buy for a number of weeks. Some agents will also insist that vendors sign a binding agreement that any further offers they receive after acceptance of an offer must be refused.

Another way of beating gazumping is to reduce the time taken between the time the offer is made and the exchange of contracts. The government has introduced a scheme (due to start in 2007) to facilitate this, in which vendors must provide a home information pack. This will include commissioning a survey, collecting the title deeds, conducting local council searches and providing details of warranties and planning permission.

However, without a financial penalty (such as the loss of a deposit) it's unlikely that gazumping will be eliminated, particularly when some buyers are willing to pay much more than the asking price and may even pay in cash.