I was recently invited to speak at a property event, and whilst there I asked the attendees which elements of the buying and selling process concerned them the most. So what was the key concern for most people I spoke to? Was it rising prices or affordability? Was it the Mortgage Market Review provisions or interest rates perhaps? No. It was Gazumping.
Gazumping is defined as: "When a seller accepts an offer from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price at the last minute, after previously agreeing to a lower one. In either case, the original buyer is left in a weak position and either has to offer a higher price or lose the purchase."
Selling and buying property is a highly emotive subject. There are trust issues usually between the seller and the estate agent and between the buyer and the estate agent and sometimes the seller and buyer. All negotiations involve risk and that's why establishing trust is crucial. So where do trust and gazumping come together in the selling and buying process.
It is a shame, but nevertheless a fact, that generally only 1 in 10 people trust the word of an estate agent. Numerous pieces of research have shown that just 11% of buyers and sellers trust their estate agent. I am not sure this is a fair reflection of reality but often perception is much more powerful than fact and the perception is that they only act in their best interests. If they are talking to the seller they say one thing and if they are talking to the buyer they say another, ultimately they do what is best for them and their commission. This lack of trust makes the negotiation process fraught for the seller and buyer.
It is also the case that estate agents tend to like to control the whole process because their fee depends upon it. They want to keep both seller and buyer apart and smooth out the detail behind closed doors. So how can gazumping be avoided?
When I started working on the Purplebricks proposition one of our key objectives was to create a service that was transparent. Mistrust is often driven by the unknown and that is why perception has become the new fact. We wanted to create an environment where the seller and buyer could have contact, ask questions, build a relationship and get to better understand each other's position. We wanted to give them the option to communicate and safely and securely negotiate through our platform.
We also wanted to ensure that the goodwill and trust that had been built up between seller and buyer would not be eroded in an instant. If the seller wants the property to continue to be marketed then the buyer would know and if another offer was received the facts are recorded on the platform and the buyer can be assured that the offer is genuine and instantly recorded in a transparent and open manner. The buyer would be the first to know that another offer had been received and if it is higher than their offer.
It is important that the seller gets the best possible price for their property and I believe every buyer will appreciate that. What they will not appreciate though is a lack of trust, openness and transparency.
Where there is trust and openness between seller and buyer there will be less gazumping. This will create a strong position and the buyer, although they may have to pay more money, will at least know that they have participated in a fair and transparent process.
Gazumping, which is a process associated with people who cannot be trusted, can be overcome if all in the property business offer a simple, transparent process.