Crosby & Woods Property Advice Newsletter April 2014 - Beware of Ghost Gazumping!
- Author: David Crosby
- Posted on: 23rd April 2014
- Posted in: Blog
With the property market resurgent, gazumping is unfortunately making a comeback. Demand for housing far outweighs supply and there is a chronic shortage of homes available to buy. The two factors that have combined to produce the new, aggressive tendency are a Bank of England that is determined to hold down interest rates and to keep on holding; and a lack of new housing stock.
What's alarming is that stunts are being pulled that did not occur even in the property bubbles in the 1980s and mid-2000s. The market is on the rise and with the help of the successful help to buy scheme, which guarantees mortgages for first time and new build buyers up to £600,000, the demand for houses has increased and the number of people able to bid on one property has increased. In turn this has increased the probability of one purchaser being gazumped.
Stories are becoming more common of sellers jacking up the price just before exchange of contracts after the buyers have incurred the cost of all of their searches and surveys and solicitors fees etc. Tales are abound: of sealed bids that aren't really sealed, where the agent reckons on who can pay the most and tips them off how much they will have to stump up; of agents who will contact vendors whose properties have been under offer for some time but progress has been slowed by the chain, and suggest they switch to them because they can get a higher price; of the return of gazumping.
This practice, of jacking up the price just before contracts are exchanged, has its own name, "ghost gazumping", because there is no rival buyer. Many purchasers pay up – usually because they're too far down the road to begin all over again, and they're aware that prices are rising, so if they go back to the start they will have to pay more anyway.
At some point, surely, rates will rise, and those who overborrowed, among them speculators, will get burnt. But the underlying, structural problem will remain: there are not enough homes to go round.
For all your conveyancing questions or queries please contact Crosby & Woods' Conveyancing Department on 01273 734600 or via email at firstname.lastname@example.org