A property sale is only legally binding once you’ve exchanged contracts. Before then, there’s nothing to stop someone making a higher offer and your seller accepting.
If that happens, you’ve been gazumped.
How is this legal?
There was some discussion about making gazumping illegal in the 2000s ... but nothing came of it.
Once you’ve had an offer accepted on a property, it’s sold STC (subject to contract). This means that until you exchange contracts, another buyer is free to better your offer.
How it works
Because you exchange contracts so late in the home-buying process, there is plenty of time to be gazumped.
If a gazumper has their eye on a property that is sold STC, they can get in touch with the estate agent and ask about when the offer was accepted and the seller's situation.
You're more at risk of being gazumped if it's taken a long time to sort out your survey and mortgage, or if your solicitors are moving slowly.
This can leave the seller impatient, and receptive to other offers.
Estate agent have varying views on gazumping, but they’re obliged to pass on information about any offers. It's in an agent's interest to get the maximum price for a property.
How to avoid getting gazumped
There are a few things you can do to lessen the likelihood of being gazumped.
Get the property off the market: Once you have your offer accepted, you want the estate agent to advertise the property as sold STC to deter bidders.
Show initiative: You should have a Mortgage-in-Principle agreed before you make an offer. This is more likely to happen if you’ve shown that you're making progress with your mortgage, conveyancing and survey.
Reach out to the seller. Stay in regular contact and make it clear that you love the property. This can help down the line.
Maintain momentum: You want to reach your exchange date., so you really don’t want to be waiting around for that moment. Keep in touch with your solicitors to ensure you’re not at the back of their queue.
I’ve been gazumped. What should I do?
First, speak with your seller. Even with a lower offer, a seller may stick with you if you can move quickly.
Alternatively, if you can afford to do so, you can make a counter-offer.
Unfortunately, you may simply have to find another property.