What are the first-time home buyers’ anxieties?
First time home buyers (FTB) don’t know what they’re up against. It is meant to be one of the most exciting times in a person’s life, finally getting themselves on the property ladder, it doesn’t take long, however, for prospective buyers to realise the challenges they face.
The buying and selling of houses can be a stressful business, and it's easy to think that all your problems will be solved once you've exchanged contracts. That's not always the case, as we'll explain in this article.
There is a list of questions that first-time owners are afraid to ask about buying a home. These could vary from how much deposit is needed, when do I pay everyone involved in the process, and what is stamp duty?
Homebuyers wish the processes were much simpler.
What is Gazumping?
Gazumping is a common practice in the property market, which is when a seller pulls out of an agreement to purchase a property before exchanging contracts.
Gazumping usually happens when another party makes a higher or otherwise better offer on the house you are trying to buy. If the seller accepts, you lose out on the purchase – it’s as simple as that. Many find gazumping unethical, as it negates an existing agreement to sell and often leaves buyers in a worse financial position.
At the point of gazumping, the buyers have usually paid various costs for the transaction, such as fees for mortgage advice, conveyancing searches and other legal fees, or valuation and surveyor fees.
In a survey of those who bought a property in England or Wales since 2012, 31% had been gazumped. That figure rose to 52% among those who bought in London!
Aside from a better offer, the other reason gazumping is so common is that the mortgage application process takes so long to finalise. This leaves space for sellers to doubt – will the transaction complete? Is the buyer going to come through with funding?
They are then likely to entertain alternative offers from buyers. You may think that the moment an offer has been accepted, you're safe. But don't be fooled: there's still a chance that someone could change their mind before you get the keys to your new place.
How can you reduce the risk of gazumping?
There are a few ways you can decrease the risk of gazumping, like:
- Asking the seller to take the property under offer off the market;
- Building a relationship with the seller – they are much less likely to pull out when they have experienced your love of the property personally;
- Getting a mortgage in principle before offering, showing you can afford to take out the mortgage and preventing any delay;
- Using a service like Acre’s property portal to check for likely conveyancing issues in advance of offering; or
- Taking out insurance to hedge against gazumping and at least decrease the risk.
Using the right technology can really help streamline the process and keep deals on track. Getting mortgage applications and applications in principle submitted early can massively decrease the risk of gazumping. Using a conveyancing partner that has good technology ensures you won’t be starting from scratch once you instruct your solicitor. And as we mentioned above, getting an early read on any risk factors that might make this property slow to transact will be helpful in making sure delays aren’t tempting the seller to second guess.
Lastly, the Government can contribute to reducing gazumping by intervening. In England and Wales, exchange of contracts is not legally binding, whereas in Scotland when a seller accepts the offer, it becomes legally binding. Unsurprisingly, many homebuyers wish gazumping was illegal. More and more homebuyers have expressed interest in the Government taking steps to prevent gazumping. While gazumping has been made illegal in Scotland, could the same be achieved in the rest of the UK?
If you're looking to buy a house, it's important to know about gazumping and how it could affect you. It's also important that you do everything you can to prevent losing the perfect property.
Acre exists to help homebuyers get into the home of their dreams as fast as possible. Using a broker that relies on Acre’s technology will help you minimise delays, eliminate duplication and data entry, and get both the mortgage and the conveyancing right, the first time. All that’s left for you to do is to charm that seller into doing the right thing – and uphold their commitment to sell!