The government is looking at ways gazumping can be eliminated – where potential homebuyers are outbid at the 11th hour.
On Sunday the government launched a call for evidence from those involved in the housebuying process to look at gazumping, as well as issues like whether innovation can speed things up.
Kate Faulkner, property consultant, said: “The major problem in our system is when you make an offer and shake on it, it means nothing.
“It can be six to eight weeks before the exchange is completed and the longer the process goes on the more likely it is to fall through.
“If an offer has been made for a property and searches aren’t ordered within 30 days it is three times more likely for sales to fall through.”
She is impressed with the government’s approach, adding: “Credit to the DCLG for taking on every issue in the property market.”
Russell Quirk, chief executive of eMoov, reckons gazumping is a big problem and blames the conveyancing sector for exacerbating the issue.
He said: “Gazumping really is the scourge of the property market and a practice that is facilitated through a draconian, archaic conveyancing system… which leaves large numbers of buyers extremely disappointed and out of pocket.
“During the most stressful part of the property purchase, it further exacerbates the emotional turmoil a buyer can find themselves in and can crush their hopes and dreams of securing that perfect property.
“The law needs to change to ensure there is a contractual obligation and to protect homebuyers much earlier on in the process.”
In Scotland gazumping is rarer than in England and Wales because once an offer is accepted it becomes binding and there are penalties from breaking that contract.
All sellers are required to commission a Home Report with a suggested property price before selling.
Buyers then bid for the property and if there’s competition they need to decide how far above the price they want to bid.
Harry McGeough, director of the MortgageForce in Scotland, reckons this system is better for buyers and sellers alike.
He said: “It gives you a more defined outcome and allows the clients to relax a bit more knowing they’ve purchased the property once the missive (the exchange of contracts between the buyer’s and seller’s solicitors) is concluded.
“In England you’ve got various chains in the process that can break down at the 11th hour
“It’s fairer on the purchaser and the seller because it gives both parties assurance on the transaction.”
Peter Izard, business development manager at Investec Private Bank, is pleased that the government is looking like issues like gazumping – but he doesn’t think changing it would be good for sellers.
He said: “The gazumping issue is the fact you could have spent a lot of time and money to then fall victim to gazumping and be out of pocket.
“I don’t think there is an easy resolution around gazumping – it’s market forces at play.”
He added: “The review is long overdue. The key to its success is to take feedback from all sectors of the industry to ensure it has a meaningful impact for consumers.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, also thinks gazumping is part and parcel of the market.
He said: “We find gazumping and gazundering, especially in current market conditions, rarely happen and are usually the result of the buyer or seller failing to keep to previously-agreed timescales.
“Should we really force buyers to buy and/or sellers to sell when prices have dropped or risen substantially, they have failed to meet their obligations or their circumstances alter?
“Some just simply change their minds.”
Responses to the consultation can be submitted by 17 December online or by post, with the government asking for a response ‘from everyone with an interest in homebuying’.