Gazumped! According to the “Word Detective” (www.word-detective.com ) "Gazumping is the despicable practice of a seller agreeing to sell a property to one buyer, and then accepting a higher bid from another buyer and dumping the first buyer. Although this usually happens before the final sale contract is signed, it is still considered highly unethical behavior on the seller's part.”
Sadly, the Word Detective is wrong, at least in so far as he believes that gazumping is still considered highly unethical. When I first returned to town to practice real estate law in the early 1980s sellers who reneged on their word did so with an air of shame and pled some exceptional financial pressure. Not so now. Gresham’s Law that “bad money drives out good” applies to morals, too, and sellers these days simply refuse to believe that their verbal acceptance of an offer means anything at all. While that is too bad, what it means for you as a buyer is that you have no deal until the seller has signed a contract. His verbal assurances are worthless, and you would be wise not to spend a dime on building inspections, architectural designs or anything else until you have a fully-executed copy of a sales contract in hand.
What you can and should do, however, is to apply for pre-approval from a mortgage lender before you begin looking for a home. That way, if you find something to bid on you can possibly waive a mortgage contingency and move straight to contract. The fewer contingencies in your offer, the more likely that it will be accepted and, more important, agreed to in writing by the seller.
Brokers I respect usually urge their sellers to hold higher offers in reserve as a backup, thereby keeping the first buyer’s feet to the fire in terms of negotiating. When, as is often the case, the sellers reject their broker’s advice and insist on breaking their word and going for top dollar those same brokers will either offer the first buyer a chance to meet the new bid or conduct a “final and best” round of bidding. Nasty brokers do neither; they shop the bid and run an ever-escalating bidding war until one buyer says phooey and walks away. The bitter taste this leaves in all buyers’ mouths makes the ensuing relationship between buyer and seller contentious and difficult. And if that deal falls through and the seller turns to the original buyer, he may well find that he has lost that person, too. Which serves him right.
The Week’s Activity
Unless you’re the owner of a home that sold (or a buyer who was gazumped) , this past week has been pretty dull. David Ogilvy’s office brought on two big ticket items of note: Jane Basham’s listing at 35 Andrews Farm Road ($16,000,000) and Dancy Cassell’s at 58 Dawn Harbor Lane in Riverside for $15,500,000. Both are nice and each is different. The Andrews Farm property is 10,000 square foot brick Georgian built in 1989, beautifully renovated in 1997 and set on 12 acres of Back Country lawns and gardens (with an additional 8 acres of conservation land). The listing claims a “major staircase” which is better, I suppose, than a general nuisance, and the grounds are outstanding. My only complaint, and one that is entirely personal, is that the approach to this beautiful home is blighted by some of the worst examples of architectural excess I’ve seen in recent memory. But that’s a quibble, and you certainly can’t see your neighbor’s lousy taste once you’re ensconced in your own land, so the heck with it; drive home after dark.
Dancy’s listing is, as the price suggests, right on the water with spectacular views of Old Greenwich Harbor, Tod’s Point and Long Island Sound. Built in 2000 and designed by that great architect, Mr. Alex Kaali-Nagy, every room is just right. Five bedrooms (with room for more), six baths, including two in the master suite, comfortable kitchen, great, private pool and so on. This being Riverside, the acreage is a mere 1.89 instead of the Back Country’s more generous sizing, but the money you’ll save on landscaping should cover the mortgage. The gardens are beautiful, the flow is perfect and, if it weren’t for the fact that the house sits on a former meadow that once afforded the neighbors their own share of those spectacular views, it would be my favorite house in Riverside. Which only tells you to buy your view because if you don’t, someone else will. Nice house.
Sadly, the Word Detective is wrong, at least in so far as he believes that gazumping is still considered highly unethical. When I first returned to town to practice real estate law in the early 1980s sellers who reneged on their word did so with an air of shame and pled some exceptional financial pressure. Not so now. Gresham’s Law that “bad money drives out good” applies to morals, too, and sellers these days simply refuse to believe that their verbal acceptance of an offer means anything at all. While that is too bad, what it means for you as a buyer is that you have no deal until the seller has signed a contract. His verbal assurances are worthless, and you would be wise not to spend a dime on building inspections, architectural designs or anything else until you have a fully-executed copy of a sales contract in hand.
What you can and should do, however, is to apply for pre-approval from a mortgage lender before you begin looking for a home. That way, if you find something to bid on you can possibly waive a mortgage contingency and move straight to contract. The fewer contingencies in your offer, the more likely that it will be accepted and, more important, agreed to in writing by the seller.
Brokers I respect usually urge their sellers to hold higher offers in reserve as a backup, thereby keeping the first buyer’s feet to the fire in terms of negotiating. When, as is often the case, the sellers reject their broker’s advice and insist on breaking their word and going for top dollar those same brokers will either offer the first buyer a chance to meet the new bid or conduct a “final and best” round of bidding. Nasty brokers do neither; they shop the bid and run an ever-escalating bidding war until one buyer says phooey and walks away. The bitter taste this leaves in all buyers’ mouths makes the ensuing relationship between buyer and seller contentious and difficult. And if that deal falls through and the seller turns to the original buyer, he may well find that he has lost that person, too. Which serves him right.
The Week’s Activity
Unless you’re the owner of a home that sold (or a buyer who was gazumped) , this past week has been pretty dull. David Ogilvy’s office brought on two big ticket items of note: Jane Basham’s listing at 35 Andrews Farm Road ($16,000,000) and Dancy Cassell’s at 58 Dawn Harbor Lane in Riverside for $15,500,000. Both are nice and each is different. The Andrews Farm property is 10,000 square foot brick Georgian built in 1989, beautifully renovated in 1997 and set on 12 acres of Back Country lawns and gardens (with an additional 8 acres of conservation land). The listing claims a “major staircase” which is better, I suppose, than a general nuisance, and the grounds are outstanding. My only complaint, and one that is entirely personal, is that the approach to this beautiful home is blighted by some of the worst examples of architectural excess I’ve seen in recent memory. But that’s a quibble, and you certainly can’t see your neighbor’s lousy taste once you’re ensconced in your own land, so the heck with it; drive home after dark.
Dancy’s listing is, as the price suggests, right on the water with spectacular views of Old Greenwich Harbor, Tod’s Point and Long Island Sound. Built in 2000 and designed by that great architect, Mr. Alex Kaali-Nagy, every room is just right. Five bedrooms (with room for more), six baths, including two in the master suite, comfortable kitchen, great, private pool and so on. This being Riverside, the acreage is a mere 1.89 instead of the Back Country’s more generous sizing, but the money you’ll save on landscaping should cover the mortgage. The gardens are beautiful, the flow is perfect and, if it weren’t for the fact that the house sits on a former meadow that once afforded the neighbors their own share of those spectacular views, it would be my favorite house in Riverside. Which only tells you to buy your view because if you don’t, someone else will. Nice house.
posted by Chris Fountain at 10:10 AM
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