Gazump

Definition of 'Gazump'


The practice of raising the price of a previously agreed-upon real estate transaction. A gazump refers to a situation where a seller and buyer of a piece of real estate (such as a parcel of land or a house) have in place a verbal agreement regarding price, but where the price is suddenly raised shortly before or at the signing. This sudden increase in price is a gazump, and while the procedure typically falls within the boundary of the law, it is often considered an unethical practice in real estate.

Investopedia explains 'Gazump'


A seller who raises the price at the last minute may try to justify the gazump by citing competing bids. In this case, the seller states that another, higher bid has been made on the property, thereby compelling the buyer to agree to the higher price or risk losing the property. The seller may also infer that if the buyer does not agree to this new price the price could continue to increase with additional competing bids. If the buyer is motivated to purchase the property, he or she may agree to the higher price to avoid losing property or facing an even higher price. Conversely, the buyer can choose to walk away from the property because the transaction has not yet been closed.

For example, assume a home is on the market with a listing price of $200,000. You make an offer to buy the property for $195,000, and the offer is accepted by the seller. Before the closing, however, the seller informs you that he has received another offer for $199,000, and he will sell to the new buyer unless you increase your offer to $199,000 or more. Because the seller had already agreed to your offer for $195,000 and is now asking for a higher price, you have been gazumped. If the seller had not already agreed to your offer, then you would have simply been outbid.

A gazump is more likely to occur in robust real estate markets where prices are increasing, or in situations where the sale progresses too slowly and the seller is getting anxious (for example, if the buyer has not yet sold his or her property).



comments powered by Disqus
Hot Definitions
  1. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  2. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  3. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  4. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  5. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  6. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
Trading Center