'Gazumping' Loophole Ups British Legal Fees
Posted May 08, 2007 10:40 pm CDT
A quirk in English property law, combined with a super-hot housing market caused by a shortage of homes for sale in London, is costing would-be purchasers of homes there extra attorney fees.
Because British law only makes real estate contracts final once they are actually exchanged, buyers are on the hook for survey, mortgage and legal fees before they actually have a legally enforceable deal to purchase a home, reports Bloomberg. This sad fact of legal life helps tempt sellers to succumb to those who swoop in with a better offer and “gazump” the would-be purchaser by trumping the initial offer with a higher price and/or better terms.
Television producer Richard Stansfield, 43, was especially unlucky. After paying $2,000 pounds ($4,000 in U.S. dollars) for the paperwork needed to buy a four-bedroom townhouse in south London, he was gazumped not once but twice. After the first rival buyer who trumped his offer bowed out, Stansfield thought the $595,000-pound residence was his. But then he was the victim of a second gazumping, as yet another buyer offered cash.
“I couldn’t believe this could happen to me on the same house, not once but twice,” says Stansfield. “Prices are rising so fast that people who probably started out decent have found themselves willing to gazump others.”