Buyers should watch out for the tricks used by the greedy when house prices are rising in a booming property market.
During a transition from a buyer’s to a seller’s market, with increasing demand outstripping supply resulting in house prices rises every month, many buyers, particularly first timers, will feel pressured into buying fearing they might lose out or face higher house prices later. This brings out some of the property industry’s worst practices and probably the worst and most well known is Gazumping.
Gazumping : This can only take place in a booming housing market. It is the situation when an often greedy seller accepts a higher price for their property, despite having previously accepted an offer from another buyer. Quite often the original buyer is invited to match or beat the new offer and a bidding war takes place. The original buyer can have more to lose as they may have already incurred expenses with legal fees and a structural survey.
It can be sweet revenge for the often derogatory offers vendors receive in a buyer’s market and the opposite, gazundering, where a buyer makes a reduced offer at the last minute on a “take it or leave it” basis, in the knowledge that the vendor is unlikely to find another buyer in a depressed market.
To avoid gazumping, buyers should insist, in writing, that once an offer is accepted, the property is taken off the market. It should also be agreed that the seller pays all expenses incurred by the buyer, in the event that the owner decides not to move or the home is bought by another buyer. It is a good idea to have a solicitor and mortgage application in place to save time and make sure the sale can progress as quickly as possible.
Watch out for house builder’s fake discounts on new homes:
House builders have always found clever ways to disguise the real actual price of their new homes. Kitchen upgrades, optional extras, carpets, turf, even heating can all be added during the reservation process to the advertised prices, which are often changed on a weekly basis. More recently the Help to Buy scheme has resulted in many developers advertising prices for 80% of the actual real price, with the remaining 20% being bought using the government shared-equity loan and repaid by the home buyer at a later date. Often the 80% price is large and eye catching with a small asterisk indicating elsewhere in small print “* using Help to Buy”
Don’t let estate agents arm-twist you into using their mortgage brokers.
In a seller’s market, buyers may fear they may lose the property if there is any slip or delay. Estate Agents play on this and suggest their in-house mortgage broker is the best way so they can chase everything on your behalf. But be aware, some of the best mortgage deals currently available can only be arranged by dealing directly with the lender.
Buyers should not yield to this sort of pressure from estate agents, it is even against the law to insist or pressure buyers to use in-house services. The President of the National Association of Estate Agents confirmed that: “Unscrupulous agents who make it difficult for buyers to proceed without speaking to their own mortgage provider are acting against guidance issued by the Office of Fair Trading in 2008. It is illegal for estate agents to put undue pressure on buyers. Violating this legislation has severe consequences and could result in the agent receiving fines or even a prison sentence.”
Stirring up panic – a “feeding frenzy” amongst buyers
Arranging for several people to view the property at the same time, normally on a Saturday creates a sense of competition and sealed bids, where each buyer makes an offer no other buyers can see, stir up even more panic amongst buyers. Often emotions play a greater part than they might otherwise have done. Buyers get carried away and can make a decision they later regret. Don’t be pressured into rushing your decision. Even if you lose a property you can nearly always find a better one. Just resign yourself that “it wasn’t meant to be.”