What is Gazumping?

Full Definition

Gazumping happens when a seller of a property accepts an offer from one buyer, allows that buyer to proceed with surveys, mortgage arrangements and conveyancing, and then accepts a higher offer from a different buyer before contracts are formally exchanged -- at which point the original buyer has no legal right to insist on completing the purchase, however much time and money they have already spent. It is possible because, in England, Wales and Northern Ireland, neither party is legally bound to a property sale until contracts are exchanged; an accepted offer is traditionally described as being "subject to contract," meaning either side can withdraw or change terms at any point up to exchange without legal penalty (though a seller who repeatedly gazumps buyers may find it harder to attract offers, and estate agents' own codes of practice generally discourage it). Gazumping tends to become more common in fast-rising or high-demand property markets, where a rival buyer has an incentive to outbid an existing accepted offer, and it can be a significant source of wasted cost for the original buyer, including survey fees, mortgage valuation fees and conveyancing costs already incurred. Buyers can partially protect themselves by exchanging contracts as quickly as possible, taking out lock-out or exclusivity agreements (which commit the seller not to negotiate with other buyers for a set period, though these are relatively uncommon and not always enforceable in practice), or taking out gazumping insurance to cover abortive costs. Scotland uses a different conveyancing system based on a binding offer and formal acceptance ("conclusion of missives"), which makes gazumping far less common there.

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