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Nobody wants to be gazumped. Having a verbal offer accepted, just to be outbid at the last minute by another buyer, can be soul destroying. Let alone costly.

Unfortunately, gazumping has become increasingly prevalent.

In April, Market Financial Solutions (MFS) commissioned an independent, nationally representative survey of more than 500 UK adults who had bought a residential property in England or Wales within the past decade.

Talk Property – MPU

The results showed 31% of respondents had been gazumped at least once during the process.

This issue predominately affects those outside of Scotland, where Gazumping has been made illegal.

Where it hasn’t been outlawed however, the practice shows no signs of slowing down, given intense levels of competition in the market.

A chronic undersupply of property has driven up prices, giving sellers the upper hand. Between 1956 and 1988, 7.5 million homes were built in England.

This plummeted to 3.1 million between 1988 and 2018. At the same time, the UK population ballooned, reaching 67.22 million by 2020.

The impact on house prices has been obvious.

At the start of 2005, the average UK house price was just over £150,000.

This rose to £277,000 by February 2022.

In the past year alone, house prices rose by over 10% as demand among buyers skyrocketed.

Buyers are unlikely to experience an easing of pressure any time soon.

It’s estimated between 300,000 and 350,000 new homes must be added to the UK’s stock every year – for a decade – to address the imbalance.

Given successive Government’s failure to act on this, gazumping is likely to remain prevalent.

Indeed, there’s currently an expected 29 prospective buyers for every residential property sold in the UK.

How much is gazumping costing buyers?

Some 37% of homebuyers said they lost out on solicitor and surveyor fees because of a purchase falling through in the past. For those who have been gazumped, nearly a quarter lost money.

These can be significant amounts too.

Buyers typically lose £2,700 on average when a purchase falls through and for just over 10%, this rises to more than £5,000.

All of this is before any stress or anxiety is factored in, along with the heartbreak of missing out on a dream home.

Many buyers also end up thoroughly demoralized. One in six (17%) buyers who were gazumped said that in the end, they settled for a property they liked less than the one they missed out on.

What’s causing the rise in gazumping?

Given the relentless competition in the market, those with no baggage have the upper hand.

When MFS asked those who had been gazumped about what caused the issue, a quarter said it was because they were stuck in a long property chain.

Where the buying process becomes reliant on other transactions, the delays allow rival bidders to swoop in at the last minute.

Stressed out and impatient sellers can suddenly find themselves facing more money or a dramatically cut timeframe.

Sellers appear happy to take advantage of this, with 20% of buyers saying they had been gazumped while awaiting the sale of their own property.

Delays in securing finance was another common issue. One in five (20%) buyers who were gazumped said long waiting times for receiving a loan opened the door for another buyer to gazump them.

Where does specialist finance fit in?

All of this doesn’t bode well for buyers going through mainstream mortgage lenders.

Applications can take weeks, if not months to process. Even once this is all done, borrowers will have to wait for the funding to be released.

With these waiting times contributing to the prevalence of gazumping, buyers need to carefully consider their options. Specialist finance may provide a way out for borrowers facing prolonged timeframes.

Bridging loans, as an example, can be issued in mere days.

Many investors, from seasoned landlords to first time buyers, use them to avoid property chains and cut down lead times.

Longer-term financial solutions are then considered – either through the sale of another property or another financial product – once the risk of gazumping has been eliminated.

Specialist BTL mortgages can also provide investors with a quick result where mainstream lenders threaten to slow everything down.

Specialist lenders, like MFS, provide the speed and flexibility that’s desperately needed in the current market.

In reducing the likelihood of gazumping, they provide buyers with the confidence to commit to a purchase.

The fear of rival bidders, delays, or lost fees can be minimised.

The Government is unlikely to act against gazumping and as such, buyers need to take it upon themselves to limit their exposure.

Fast finance can be the key differentiator.

Anyone investing in property should consider how the right lender and product could protect them from this intense marketplace.

Sunny Bassi
At MFS, we can make a complete assessment of an individual’s financial situation, including their assets, to make case-by-case decisions on what loans can be offered and at what terms.
By using an MFS loan, landlords can bridge the gap between the start of a renovation project and the sourcing of a longer-term financial solution.
Ultimately, we understand that increasing the sustainability of a property often reduces the risk on the loan.
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Scott Lord
Scott Lord, Underwriting Manager, MFS

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