Gazumping occurs when a seller accepts an oral offer on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orally agreeing to a lower one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase. The term gazumping is most commonly used in the UK, Ireland and Australia, although similar practices can be found in some other jurisdictions.
What is ‘Gazump’
The practice of raising the price of a previously agreed-upon real estate transaction. A gazump refers to a situation where a seller and buyer of a piece of real estate (such as a parcel of land or a house) have in place a verbal agreement regarding price, but where the price is suddenly raised shortly before or at the signing. This sudden increase in price is a gazump, and while the procedure typically falls within the boundary of the law, it is often considered an unethical practice in real estate.
A seller who raises the price at the last minute may try to justify the gazump by citing competing bids. In this case, the seller states that another, higher bid has been made on the property, thereby compelling the buyer to agree to the higher price or risk losing the property. The seller may also infer that if the buyer does not agree to this new price the price could continue to increase with additional competing bids. If the buyer is motivated to purchase the property, he or she may agree to the higher price to avoid losing property or facing an even higher price. Conversely, the buyer can choose to walk away from the property because the transaction has not yet been closed.
For example, assume a home is on the market with a listing price of $200,000. You make an offer to buy the property for $195,000, and the offer is accepted by the seller. Before the closing, however, the seller informs you that he has received another offer for $199,000, and he will sell to the new buyer unless you increase your offer to $199,000 or more. Because the seller had already agreed to your offer for $195,000 and is now asking for a higher price, you have been gazumped. If the seller had not already agreed to your offer, then you would have simply been outbid.
A gazump is more likely to occur in robust real estate markets where prices are increasing, or in situations where the sale progresses too slowly and the seller is getting anxious (for example, if the buyer has not yet sold his or her property).
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