AskDefine | Define gazump

Dictionary Definition

gazump

Verb

1 rip off; ask an unreasonable price [syn: overcharge, soak, surcharge, fleece, plume, pluck, rob, hook] [ant: undercharge]
2 raise the price of something after agreeing on a lower price

User Contributed Dictionary

English

Verb

to gazump
  1. To raise the selling price of something (especially property) after previously agreeing to a lower one
  2. To buy a property by bidding more than the price of an existing, accepted offer

Derived terms

See also

Extensive Definition

The verb "gazump" means to refuse to formalise a property sale agreement at the last minute in order to accept a higher offer. The word is thought by some people to have come from the Yiddish word gazumph meaning to swindle or overcharge, which became gangster slang in the 1920s.

Usage in modern society

With buoyant property prices in the British residential property market of the late 1980s and early 1990s, gazumping became commonplace in England and Wales because a buyer's offer is not legally binding even after acceptance of the offer by the vendor. This is because, by s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 and in order to prevent dishonesty, a contract for the sale of land must be in writing, a fundamental principle of English law that dates back to the Statute of Frauds of 1677.
When the owner accepts the offer on a property, the buyer will usually not yet have commissioned a building survey nor will the buyer have yet had the opportunity to perform recommended legal checks. The offer to purchase is made "subject to contract" and thus, until written contracts are exchanged either party can pull out at any time. It can take as long as 10-12 weeks for formalities to be completed, and if the seller is tempted by a higher offer during this period it leaves the buyer disappointed and out-of-pocket.
When property prices are in decline the practice of gazumping becomes rare. The term gazundering has been coined for the opposite practice whereby the buyer waits until everybody is poised to exchange contracts before lowering the offer on the property, threatening the collapse of a whole chain of house sales waiting for the deal to go through.
Scots law and practice makes the problem of gazumping a rarity in Scotland. In the Scottish system of conveyancing buyers either obtain a survey prior to making a bid to the seller's solicitor or make an offer "Subject to Survey". Sellers normally set a closing date for written offers, then provide written acceptance of the chosen bid. The agreement becomes binding when a seller's solicitor delivers a signed written acceptance of a buyer's offer. Should the seller attempt to accept a higher bid before the contracts have been legally finalised by a written offer and acceptance, their solicitor will refuse to act for them as this, according to the Law Society of Scotland code of practice, would be professional misconduct. As in England, all contracts for the sale of land must be evidenced in writing signed by or on behalf of each party. In Scotland the parties' solicitors sign on their behalf, unlike in England, where buyer and seller both sign a contract which has been produced in duplicate form, with the duplicates then being exchanged to effect a binding contract. It is often wrongly claimed that gazumping is a rarity in Scotland because it is said that an oral agreement on a property deal is legally binding; while the law on contract differs from the law in England, the rarity is due to the different system of conveyancing.
In Scotland however, an Estate Agent, acting on behalf of the seller, can initiate instances of another form of gazumping. Once a closing date for written offers has been reached and an Estate Agent has given a verbal acceptance of the chosen bid, the Estate Agent can then attempt to induce a bidding war between the successful buyer and a rival, who may be fictional, in an attempt to increase the offer made by each party. In such circumstance there is little recourse for a successful buyer who, despite having been informed verbally that their offer has been accepted, is then informed verbally that their offer has been rejected in favour of a higher bid. Such situations only occur at an early stage of the conveyancing process, prior to any written acceptance of an offer being given by the seller's solicitor. Often they result from the legal requirement on the part of Estate Agents to advise a seller of any higher offer received prior to written confirmation of a verbally accepted offer being given, including those received after a closing date.
In Scotland, gazundering is possible where the buyer has insufficient assets to be worth suing, but is not common.
The term gazumping is not used in the United States. Every state has different laws and traditions, but buyers typically make a written offer that, when accepted (signed) by the seller, is in most localities binding on the seller. U.S. residential purchase contracts typically contain an inspection clause, a short period during which the buyer can inspect the property and back out of the contract with the full return of the earnest money, if the property does not pass the buyer's inspections. The seller, however, cannot, except in some states, back out during the inspection period. New Jersey is one state where the seller has a "legal review" period, during which they can back out of an accepted contract.
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