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.

BREAKING DOWN '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).

RELATED TERMS
  1. Gazunder

    A colloquial term used in the United Kingdom for the practice ...
  2. Buyer's Market

    A situation in which supply exceeds demand, giving purchasers ...
  3. Simultaneous Closing - SIMO

    A real estate financing strategy in which two simultaneous transactions ...
  4. Conditional Offer

    In general, an agreement between a buyer and a seller that an ...
  5. List Price

    1. The manufacturer's suggested retail price, determined by supply ...
  6. Settlement Agent

    1. The party involved in completing a transaction between a buyer ...
Related Articles
  1. Personal Finance

    Ins And Outs Of Seller-Financed Real Estate Deals

    Seller financing works like this: Instead of a buyer receiving a loan from a bank, the person selling the house lends the buyer the money for the purchase.
  2. Trading

    How To Make Money WIth Real Estate Options

    Buying real estate options is one way to invest in real estate at a lower entry cost.
  3. Personal Finance

    10 Tips for Getting a Fair Price on a Home

    When the housing market booms, it's tougher than ever to get a good price. Make sure the house you choose is worth the price you pay.
  4. Personal Finance

    Rent-To-Own Real Estate Full Of Pitfalls

    Before you consider this type of arrangement, you should be aware of how it works, who benefits and the many things that can go wrong.
  5. Investing

    Rent To Own; Own To Rent

    This method can help first-time buyers afford a home using a rent-to-own strategy, and it can also be good for investors.
  6. Personal Finance

    Playing Hardball When Selling Your Home

    Using these strategies will help you get more cash when selling your house.
  7. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  8. Personal Finance

    Purchasing A Short-Sale Property

    If you are looking for a good deal and have time to wait, a short-sale house may be for you.
  9. Investing

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
  10. Financial Advisor

    5 Tips For Recession House Hunters

    Follow these five tips to get a leg up on rival bargain hunters.
RELATED FAQS
  1. What do people mean when they mention real estate gazunders or gazumps?

    A gazump refers to the practice of raising the real estate's price from what was already verbally agreed upon. This move ... Read Answer >>
  2. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ... Read Answer >>
  3. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ... Read Answer >>
  4. What does the variance between the bid and ask price of a stock mean?

    Find out how stocks are traded in the market, why the bid and ask prices are different and why the bid-ask spread is smallest ... Read Answer >>
  5. What's the difference between a letter of credit and a bank guarantee?

    Learn how letters of credit and bank guarantees differ, how they are used by banks and companies, and how buyers apply to ... Read Answer >>
  6. What criteria does a property need to meet to be considered an 'investment grade' ...

    Learn what it takes for institutional investors to consider a property "investment grade," such as real estate investment ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center