In the bustling realm of the Scottish property market, potential homebuyers face a unique challenge – gazumping. While this term might sound like a quirky Scottish tradition, it’s a phenomenon that can send ripples of frustration through even the most composed property seekers. In this blog, we’ll delve into the intricacies of gazumping, discussing what it is, how it works and how to protect yourself from it to safeguard your property-buying dreams.
What is Gazumping?
Picture this: you’ve found the perfect property, negotiated a deal, and are on the brink of sealing the deal when suddenly, another buyer swoops in with a better offer, leaving you out in the cold. In simple terms, gazumping is when a buyer and seller agree on a price for a property, but the seller then sells the property to another buyer at a higher price or quicker completion instead – leaving the original buyer out of pocket and out of the property they set their sights on.
Gazumping can be a heart-wrenching experience, and while it’s (thankfully) not as rampant in Scotland as in other parts of the UK, it’s still perfectly legal north of the border and a potential hurdle in your property-buying journey.
Want to learn more about gazumping? Check out the Law Society of Scotland website for the legal definition.
How Does Gazumping Work?
Knowledge is power. So, to avoid this pesky practice, it’s a good idea to acquaint yourself with how the process works to prevent it from happening on your property-buying journey.
If another buyer offers the seller more money than the amount agreed with the original buyer, the seller can accept that offer and abandon their agreement with the original buyer. In Scottish law, the contracts involved in purchasing property aren’t legally binding until they have been broken and put into writing, called the ‘exchange of the missives’. This means that gazumping is possible as long as this essential part of the process hasn’t yet happened.
On a happier note, you’ll find that most reputable solicitors (those in charge of the property sale’s legal aspects) will not get involved if gazumping occurs. Typically, a seller will already have a solicitor in place when the chance to gazump appears. If they take it, the solicitor will likely back out of the process, meaning the seller must find a new solicitor at their own expense. This can help take away some of the appeal of gazumping.
Why Is Gazumping Legal in Scotland?
As mentioned above, gazumping is technically legal in Scotland. This is because verbal agreements, or even those in writing, between the seller and original buyer aren’t legally binding until the missives are drawn up – meaning both the seller and the buyer can back out at any time up to this point without consequence.
If the buyer or seller decides to withdraw once the missives are concluded, there is a legally enforceable breach of contract, meaning the other party can claim abortive costs. The solicitor, estate agent or auction house (whichever is applicable in the sale of the property) can also claim for sunk costs.
Protecting Yourself from Gazumping
While it’s not possible to fully protect yourself from gazumping in Scotland, there are steps you can take to reduce the likelihood of losing your dream home to underhanded tactics.
- Take Swift Action – Once you’ve found the right home for you, moving quickly in the property-buying process is important to prevent outside buyers from attempting to gazump.
- Submit a Note of Interest – In Scotland, a Note of Interest signals your serious intent to purchase a property. If the seller decides to go to a Closing Date, anyone interested in the property can bid for it anonymously. However, if the seller doesn’t receive multiple Notes of Interest, they may decide to move forward with your offer, meaning getting yours in quickly is key.
- Maintain Open Communication – Clear and transparent communication with both the seller and their estate agent or solicitor is essential to ensure you’re the first to know of any changes. If your offer is pending, the seller can entertain other offers without informing you. Stay proactive and engaged in the process via your solicitor.
- Get Everything in Writing – Document all negotiations, agreements and terms in writing. This will not only provide clarity but also act as your own personal paper trail should anything change. Remember, however, that until the missives are concluded, you won’t have a legally binding contract.
- Consider a Property Reservation Agreement – While this is less common in Scotland, a Property Reservation Agreement can offer an additional layer of protection in the property-buying process. This legally binding document may deter sellers from considering other offers after accepting yours.
- Work with Reputable Solicitors – Collaborate with reputable solicitors who have a policy against engaging in transactions involving gazumping. Their ethical stance may add an extra layer of protection to your buying process.
- Be Financially Prepared – Have your finances in order and be ready to proceed swiftly. Being financially prepared enhances your credibility as a serious buyer and may protect you against gazumping if you can quickly fund the purchase.
- Build a Good Relationship with the Seller – Establishing a positive rapport with the seller may make them more inclined to honour their agreement with you rather than consider offers from other buyers. Never underestimate the power of relationships in the home-buying process!
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