The Prevalence Of Gazumping And How Specialist Finance Can Help

Defined as when a seller accepts a higher offer on their property, despite having already verbally agreed to another offer from a different buyer, the practice of gazumping is as ubiquitous as ever.

Indeed, the competitive nature of the UK property market is a key factor in the continuing prevalence of gazumping. In late 2021, for example, it is estimated that for every residential property that was up for sale there were around 29 prospective buyers.

Certainly, a chronic undersupply of properties and increasingly high demand amongst buyers and investors have contributed to this competitiveness, as well as a rise in prices. For instance, in 2005, the average price of a house would set you back £150,000. In February 2022, the average price had soared to around £277,000, with an increase of over 10% in the last 12 months alone.

With prices and competition so high, aggressive buying tactics like gazumping have become essential to prospective buyers who want to avoid missing out on a home they like.

The prevalence and ramifications of being gazumped

At Market Financial Solutions, we recently carried out some research amongst more than 500 home buyers who had purchased a residential property within the last 10 years. Worryingly, we found that almost a third (31%) of buyers in England and Wales had been gazumped when trying to buy a property, whilst over half (51%) of respondents in London reported the same experience.

Some 37% of buyers said they lost out on solicitor and surveyor fees due to a purchase falling through. Of those who have been gazumped, 23% lost money in the process. These are alarming figures, considering that home buyers can lose around £2,700 on average, with this figure rising above £5,000 for more than 10% of buyers. 

Indeed, it is not just the financial ramifications of being gazumped that can impact a prospective buyer. In many cases, buyers will be attempting to purchase a property that they have had their sights – and their hearts – on for some time. 

Therefore, with 17% of buyers settling for a property that they liked less than the one they wanted originally, there is also an emotional toll of being gazumped.

Understanding gazumping

As the economy becomes increasingly unstable, sellers will be looking to secure the best possible offer, even if that means that someone gets gazumped in the process. And with almost half (47%) of buyers admitting that they would resort to gazumping if it meant winning their preferred property, it is unlikely that buyers will experience an easing of pressure any time soon.

With this in mind, for prospective home buyers to protect themselves from being gazumped, they must first understand the factors that leave them vulnerable to the practice. From our research, it is clear that long property chains and delays in finding finance are the most significant risks.

In fact, one in four (25%) of home buyers said that they were gazumped because they were stuck in a long property chain, whilst one in five (20%) cited delays with their mortgage lender as the cause for missing out on a purchase.

In both instances, delays in receiving a financial product to complete the purchase or waiting for another property to be sold to free up property leave buyers vulnerable to rival bidders coming in and offering a high price. As such, when provided with a more attractive or speedier offer, sellers are often likely to take the higher offer.

So, how can buyers and investors better protect themselves?

How specialist finance can help

Naturally, moving quickly is essential when trying to buy a property in England and Wales. Therefore, potential landlords would do well to seek alternative finance to secure their properties, due to their speed and flexibility in comparison to traditional lenders.

The bridging sector is uniquely placed to provide buyers with these alternative financing options. For instance, a buy-to-let (BTL) landlord might require a mortgage in a shorter time frame than a traditional lender can provide. As such, a BTL mortgage from a specialist lender can provide landlords with the finance they need to complete a purchase quickly because they can be issued in as little as a week after the initial enquiry.

Similarly, bridging loans can be issued in as little as three days and could help prospective buyers avoid getting caught up in a long property chain. For instance, if a landlord needs to sell a property to free up capital for the purchase of another home, then a bridging loan can be used to refinance the original property and give the landlord time to sell it.

Indeed, if buyers are facing delays with their mortgage provider, then a bridging loan can also enable them to buy the property and therefore avoid being gazumped, before finalising their application for a longer-term financial product.

To briefly conclude, despite 80% of home buyers supporting anti-gazumping legislation it is unlikely that a ban will be implemented any time soon. As such, consulting specialist lenders and exploring the range of fast finance products that are out there will go a long way towards protecting buyers from gazumping in today’s highly competitive market.

About the author: Paresh Raja is the founder and CEO of Market Financial Solutions (MFS) – a London-based bridging loan provider. Prior to establishing MFS in 2006, Paresh worked as a senior professional consultant in one of the top five management consultancy firms, and also set up an independent investment group.

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