Is Your Word Your Bond?

1st May 2004

T. Wyn Jones

People keep on telling me that the property market is on the decline. The Building Societies & Banks run off figures how property prices have dropped in the last 2 months and how unsustainable it all is. But all this negative talk does not seem to have affected the property market – certainly not the local/regional market in the Welsh Marches and Wales.

More to the point if the property market is on the decline why have we for the last 2 months or so seen an increase in gazzumping?

For those people who have not come across this term and do not remember the late 1980’s gazzumping is the practice of vendors who accept a higher offer for the sale of their property from a second party even though they had previously agreed to sell the property to an initial party.

This practice can be carried out at varying stages of the sale process but most infuriatingly when the purchasers have commissioned a survey, arranged the required borrowing and have incurred a large bill from their solicitors.

More often than not it’s the Estate Agent who receives the full brunt of the unhappy purchaser’s anger, in fact the hapless Estate Agent is often castigated as the party at fault, which is obviously not the case but people always want to shoot the messenger.

The Agent is employed by the seller/vendor and has to take their instructions. If their instructions are to accept a higher offer from another party then that is what they have to do.

Gazzumping can occur due to the property remaining on the open market and being open to offers, but in most instances once the sale is agreed the property is withdrawn off the market with no further advertising or viewings taking place.

However, what I find the greatest problem in this buoyant market is all too often we see a party who previously viewed a property subsequently finds themselves in a position to proceed with the purchase (say having since found a buyer for their property) only to find that a sale has already been agreed on their proposed purchase but will nevertheless make an offer. The Estate Agent is obligated by law to convey that offer to his client and so the vendor is faced with a dilemma – do they continue with the sale to the original purchaser or jump ship and go with the second party who have offered more money? Do they gazzump or not?

So how do we ensure that this practice is minimised? In my view there are 2 things that the purchaser must ensure:

1. If their offer is accepted on a property ask the Selling Agent as to whether the property will be withdrawn off the market. If the Agent’s instructions are to continue marketing the property then ask why. Isn’t the vendor committed to the sale to you? Secondly

2. Ensure that the transaction proceeds efficiently and as quickly as possible. Remember the market is rising. If your purchase was agreed some months back and contracts have still not been exchanged the vendor may get second thoughts, surely if the property market has moved on and up the value of their property has too.

A recent example of this was a sale of a cottage agreed more than 3 months ago at a price of £90,000 Just prior to exchange the vendor asked for a second opinion as to the value of the property as she was somewhat concerned as time had gone on. Subsequent to a visit by a second agent she was advised of a figure closer to £120,000. The prospective purchaser was informed of this figure and offered the opportunity to purchase at the revised asking price, needless to say the offer was rejected. The property in question was placed back on the market at the new price of £120,000 and a new sale was agreed days later.

Now if the original purchasers had proceeded at a quicker pace it is they who would have benefited from the increase in the property market and not the original owners.

So in conclusion ask the Estate Agent as to whether the property will be taken off the market and chase up your purchase – at least once a week. Remember an agent’s job does not stop when a deal is done. A good agent should be in contact with you at least once a week chasing things and getting things moving. And remember your solicitor is acting for you, its you who pay their bill. Contact them at least once a week and ask them how things are proceeding and if they haven’t done anything ask them why not.

For further information on Property Matters Wyn can be contacted on Tel 07702 722905 or by e-mail on wyn@mccartneys.co.uk