What is Gazumping and Why is it So Controversial?

In the UK, gazumping is a controversial practice in the property market. It occurs when a seller, after accepting an offer on their property, decides to sell to another buyer who presents a higher offer. This leaves the initial buyer in a vulnerable position, having already invested time and money into the purchasing process.

Buyers may have incurred significant expenses, such as estate agent fees, valuations, or financial costs, which can easily add up to thousands of pounds. Beyond the financial impact, losing a property can be emotionally devastating, especially if it was a dream home.

Why is it legal in the UK?

Gazumping is allowed because of the way the property purchasing process is structured in the UK. The sale is not legally binding until the contracts are signed, which means that even after accepting an offer, the seller is free to accept a higher bid, leaving the buyer unprotected.

Is gazumping legal in Spain?

In Spain, this practice is uncommon thanks to the deposit contract (contrato de arras), a pre-sale agreement that protects both the buyer and the seller. Once this contract is signed, both parties are obligated to follow through with the terms. For instance, if the buyer pays 10% of the property's price as a deposit, the seller cannot accept another offer without consequences.

What happens if the seller backs out?

If the seller decides not to proceed after signing a deposit contract, they must compensate the buyer with double the amount paid. For example, if the buyer paid €20,000 as a deposit, the seller would need to pay them €40,000 if they breach the agreement.

What if the buyer backs out?

Conversely, if the buyer decides not to proceed with the purchase, they forfeit the deposit paid, which protects the seller. This system offers a balanced legal protection, making gazumping nearly non-existent in Spain.