‘Gazumping’ is the term used to refer to when a seller accepts an offer from one potential buyer, but then accepts a higher offer from someone else. The first buyer either has to offer a higher price or accept that they have lost that home and continue looking. This practice tends to occur in a market when house prices are rising are there are more buyers around than sellers.
The problem is that until contracts have been exchanged the sale agreement is not legally binding. Once your offer has been accepted, either you or the seller can pull out at any time until the exchange of contracts. Estate agents are legally obliged to inform sellers of all offers made on their property, even after one offer has been accepted. However, during the period between the acceptance of your offer and exchange, you, as the buyer, spend a considerable amount of money on surveys, solicitor’s fees, and confirmation of your mortgage offer. If the sale falls through you do not get this money back, and have to incur these expenses all over again next time round. If you are part of a chain of sales, you could even be affected by someone else being gazumped.