Catherine Cockcroft, Director and Head of Lettings at Aylesford International, talks about a recent survey which indicated that gazumping is now common in the buy-to-let market.
“We have had a few times when we have had two applicants fighting for a property.
On one property one potential tenant was prepared to pay 40% above the other offer. In this case, the second offer was for six months only and the original offer was a year with a commitment of 10 months, but a potential for it to be renewed for a second year. The client kept to the first offer on the basis that it was a long let.
In another case, the rent on a property had just been reduced. We immediately received two offers and the rent was pushed back to its original asking price.
It is very difficult from the agent’s point of view as we are obliged to put forward all offers to a landlord and ultimately it is their decision.
More recently, tenants have paid a reservation fee, which is usually one or two weeks’ rent, in order to stop the landlord showing the property whilst the paperwork is done. This fee would revert to being part of the initial payment when the contracts are signed.
However, this is not foolproof as, if the tenant pulls out prior to signing the agreement, you can only deduct reasonable charges (credit reference searches/lease charges) and the rest is returned to the applicant. So it does not take into account of any other potential offer, or time lost when we could have been showing the property.
From the landlord’s side, they can pull out any time prior to completion of the contracts and they just return the reservation fee to the tenant.
Gazumping will still happen
Whilst both parties have the right to pull out of a deal prior to it being completed, gazumping will still happen. However, in my experience, many landlords will go with the first offer, especially if referencing has been done. Otherwise, there is the potential of losing both deals and having no tenant at all.”