Gazumping

[andrewducker]

I'm going to hell for this one.

I put my flat on the market last Tuesday. I thought it was worth about £105k, the estate agent thought it was worth £100k, we agreed to put it on for offers over £87k. For those of you who don't know how scottish property sales work, you put a property on for "offers over x" and then people put in blind bids. The highest bid is then accepted and everyone goes home reasonably happy.

Instead, what happened was that on Thursday, while I was out seeing other flats, a guy came round and saw the flat and asked Ed how much we were thinking of. Ed said "Whatever we can get.", which was the right answer. The guy wouldn't take no for an answer though and pushed him, so Ed todl him we were looking for £105k. So the guy offered £106k and said he'd get a bid in the next day. I was rather happy about this, as it looked like no matter what I was going to get a decent price for it.

Except that the next day (Friday), when my solicitors called to tell me there was a bid they told me that the guy wanted it accepted by the end of the day. I wasn't happy about this, as I felt bullied into accepting early, especially on top of him pushing Ed into telling him what we wanted. So I told my solicitors I wanted to stay open until Monday (viewings are traditionally Thursdays and Sundays). I then tried to phone the guy who'd made the offer and explain the situation. He didn't answer his phone, leaving me feeling even more like he was trying to push me into a fast sale. At 4:45, however, I cracked, phoned my solicitors and said "Take it! Take it before it goes away! Damn my weak will!" or words to that effect.

Which just left Sunday's viewings to sort. We decided that Ed would go and view flats while I stayed at home and told any viewers that we weren't on the market any more. Except that at half three someone turned up, took a quick look and said "Shame it's gone, but I assume they offered you quite a lot for it." to which I replied "£106." He laughed and offered me £115k on the spot.

So on Monday morning I called my solicitors and checked the legality on backing out on the previous offer (legal, but they can't do it for me, so I've had to move to a different solicitor), and then went ahead with it. I feel slightly guilty, but not very much - if I hadn't felt bullied in the first place I'd feel moreso, but as it is I'm selling to someone who wants it more, getting more cash, and the person who tried to buy off me for cheap has to go find somewhere else.

I'm probably still going to hell though.

Comments

[ripperlyn.livejournal.com]

I really don't think you're going to hell for this. I think, more likely, this guy realized that if he could bully you into making the sale he'd get off 10K cheaper. So basically he was being a bastard and you out-bastarded him. For which, IMO, you should win a prize. :)

[onceupon.livejournal.com]

Seconded!

[heron61.livejournal.com]

and again.

[ripperlyn.livejournal.com]

Dude. I *love* your glasses.

[onceupon.livejournal.com]

Thanks! They are 4 or 5 years old at this point but I just keep updating the prescription because I love them so much.

[cx650.livejournal.com]

"I'm probably still going to hell though."

Possibly, but you'll be £9k better off in the meantime.

[spaj.livejournal.com]

I thought you didn't believe in morals.
Even if you did, I don't remember anything in the bible about "THOU SHALT NOT GAZUMP".

And as has already been pointed out, 9k!

[a-pawson.livejournal.com]

This sort of thing is common practice in England, but I thought it couldn't happen in Scotland because verbal contracts were legally binding. Is this not the case?

[andrewducker]

The article here is actually pretty clear on it:
http://en.wikipedia.org/wiki/Gazump

[surliminal.livejournal.com]

and as your experience shows that article is now out of date, as in urban Scotland at least, the practice has now arisen just like in England of making offers subject to survey rather than as final binding bids, and many properties are on sale fixed price.. which is taking us towards the ghastly english system :(

[chuma.livejournal.com]

I fail to see how fixed price is worse than "offers over" and then watching them go for 40-100% more than the original price.

There was a time when it was 10-15% and you knew where you stood, these days it is just a ploy to get more people through the door and having notes of interest on the property.

We might not have so much problems with gazumping; we have our own set of problems like over inflated prices.

[surliminal.livejournal.com]

Oh god yeh, FP is a sensible response to a bubble.

I just meant we are importing the English vice of gazumping, which as everyone says used to be unknown in Scotland. OTOH we don't have the English practice of trying to bargain FPs down (tho I tried to talk Andy into it:) - the more (Sc) people make conditional offers and pull out of sales/purchases, or extend bargaining , the longer the transaction will take. the worst case scenario is that we end up with broken chains and extended failures to go through with transactions just like in England - blerg. Once upon a time the average house sale took 6 weeks in Sc from start ot finish - pretty bloody good.

And actually we're still nowhere near as over inflated as the SE. I can't buh-lieve the prices down here..

[andrewducker]

The US solution to the gazumping problem seems reasonable to me:

The term gazumping is not used in the United States. Every state has different laws and traditions, however, buyers typically make a written offer which when accepted (signed) by the seller is binding on the seller. U.S. residential purchase contracts typically contain an inspection clause, a short period of time during which the buyer can inspect the property and back out of the contract with the full return of the earnest money, if the property does not pass the buyer's inspections. The seller, however, can not back out during the inspection period.

And I'm not so sure that the SE is that badly overinflated compared to Scotland. If you compare rental prices to buying the ratio isn't that far out, IIRC.

[surliminal.livejournal.com]

That just means the rental prices are over inflated too!!!! Edinburgh rents are in fact way cheaper than Soton (over supply I guess) which is weird as the house prices are comparable maybe cheaper.

Beleieve me I'm rich in Glasgow south side, comofortable in Edinburgh and Southampton, and I'd be living in a one bedroom flat in any area of London I'd willingly move to.

[andrewducker]

Expensive is not the same as over-inflated. More people want to live in London than want to live in Edinburgh or Glasgow, so it costs more. Prices are overinflated because of people buying as investments in a rising market - it's a bubble caused by people assuming prices will rise forever, and eventually it will burst.

[surliminal.livejournal.com]

ps that US system sounds pretty good tho I expect it too has disadvantages.

Incidentally there is a perfectly good solution to the current Scottish problems: get seller to order ONE survey which is then made available to all possible buyers (within a certain timeframe obviously - but houses don't last long in current market) - which means buyers can put in firm offers straightaway, without going broke on lost surveys when they don't win the auction. End of gazumping. It was trialled but never taken on by the Exec, mainly it is rumoured because surveyors would then have not been able to make vast sums for old rope :-P

[drdoug.livejournal.com]

How would that work in professional liability terms for the surveyor?

The eventual buyer will presumably want some form of comeback on the surveyor if their report negligently failed to disclose some defect of the property that a reasonable person would deem to materially affect the price. This is straightforward legally if the buyer instructs the surveyor, but is in to strange and dangerous third-party/vicarious liability territory, surely?

One can predict that issue would be a live one, too - the seller and buyer have obviously different interests in what the surveyor says about the property!

(AIUI this question was the legitimate one on which the compulsory survey component in the Eng/Wales HIPs foundered. Although the smart money says it's more about the old-rope lobby here too.)

[andrewducker]

The surveyor should be professionally liable for the results of their survey. The buyer eventually pays back the seller for the cost of the HIP, so you could argue in this case that the seller was merely the agent of the eventual buyer in the matter.

The surveyor should be held responsible for finding certain things, and a percentage of the cost of fixing them. Would get rid of the current system where they come round, gaze at the ceiling, chew their pencil, and then re-use the survey they did 5 years previously.

[surliminal.livejournal.com]

It probably needs statute to clarify that "the seller is the agent of the buyer" - I think the Scots intention was to pass a law if the trial worked out - but it didn't , for whatever reason :-(

In reality, in most urban areas, surveypor's liability is a complete red herring - surveys are done in 10 mins and are a license to print money, houses have been surveyed a 1000 times before. (My own last surveyor didn't even measure anything - he spent 90% of the 5 mins he was there looking to make sure he hadn't got a parking ticket. This costs £250. He asked ME what i thought the property was worth. )Only in rural areas or with very old or expensive houses is there really like to be a possible claim on a surveyor for missing something. Yes you can get better surveys, where liability might be a live issue, but I'd like to see figs on how many house buyers actually pay the extra money - you get what the mortgage co demands, no more no less.

[pisica.livejournal.com]

A friend got shafted by this - AIUI your solicitor can't renege on the deal, but there's nothing to stop you from changing solicitors, and apparently there are entire solicitor firms in Glasgow (of course) who specialise in nothing but.

[andrewducker]

Indeed. Quoth my solicitors "We can't help you, but we'll pass you onto someone who can."

[chuma.livejournal.com]

Nothing is concrete until missives are exchanged I believe

[surliminal.livejournal.com]

Yup. Oral agreements re heritable (land) property aren't worth the paper they're not written on :-)

[redshira.livejournal.com]

Huzzah! I'm probably more pleased about it than I should be, but it just didn't seem right when you told us on Saturday. So, yes. Well done there.

[kurosau.livejournal.com]

Screw that and screw him. I would've used that tactic on you, assuming your place was that nice, and I wouldn't have been surprised if you'd seen through it.

Does real estate in Scotland have a 'best and biggest offer' custom? I'm in the the US in Seattle, and we certainly do around here. Namely, people want you to sell as low as you can, and yet also pony up all of the money you can when offering bids to get property.

My problem with that custom is that it feels to me like agents taking advantage of the customers they represent on both sides of the equation. Personally, I find a little healthy competition between seller and buyer to be a good route to fairness, once you've gotten the requisite protections out of the way.

[johanna-alice.livejournal.com]

Take the money. Grin lots. Stuff like that. I have the impression that kind of thing is expected in the property market right up to the point of opening a vein signing contracts.

I'm probably still going to hell though...

[stormie.livejournal.com]

nice to know I'll have company :)

I don't blame you but...

[ratmist.livejournal.com]

You may have been better off going to a closing date. At least with a closing date you could've seen a bunch of different offers and chosen whatever one you wanted. It's more hassle, and I get that it's all weird now, but that was an option...

Re: I don't blame you but...

[andrewducker]

Yeah - if I hadn't jumped into taking the original offer then I would have just gone to a closing date sometime this week, and it would all have been fine!

[laserboy.livejournal.com]

Och all's fair really.

As Adam points out, you claimed to have no morals so what's the problem? ;-)

[channelpenguin.livejournal.com]

ooh, so that's how gazump in Scotland!

(noted for future reference)

[dalglir.livejournal.com]

RARRR!

AFAIK - you're perfectly at liberty to back out until missives have been exchanged. Of course, that works _both_ ways....

[taromazzy.livejournal.com]

The Special Hell.