Money: You're gazumped

You never forget how you feel when you first find out you've been gazumped. It's almost a physical ache of hopeless, helpless frustration. And it's also a depressing indication of how people can become greedy monsters when they sell their house.

If you live in London or another of the property "hotspots", the pace is frantic: there are tales of houses being snapped up within hours of going on the market.

"Gazumping probably only affects a very small percentage of sales, and is confined to London and the Home Counties where the property market is at its busiest," says Hugh Duns-more-Hardy, of the National Association of Estate Agents. "But it usually leaves the buyer feeling very disillusioned with the whole process."

The problem in London is exacerbated by City workers, who can pay cash. Anyone unfortunate enough to need a mortgage is liable to be passed over in favour of a buyer who can complete the deal within days.

Mr Dunsmore-Hardy says it has long been recognised that the gap between accepting an offer and signing a legal contract is the root of the gazumping problem. "In Scotland, for example, where an offer is binding as soon as it's been made, there isn't this kind of problem."

It won't come as any comfort to today's house buyers, but the Government is looking into the process of buying and selling homes. It has rejected moves to make gazumping illegal. Instead, in a consultation document issued earlier this year, it concentrated on measures to speed up the process.

These included a suggested standard search from local authorities (in parts of inner London, searches are taking several weeks to produce) and a "seller's pack", which vendors will have to show to prospective buyers. In effect, this means you have to pay for the survey on your own home before it goes on to the market.

Legal & General, which owns 1,300 estate agents and mortgage brokers, has been running a pilot scheme to test some of the Government's ideas, including the seller's pack. L&G's Peter Timberlake says that the pack has made the house-buying process more straightforward. "We've been testing it over the last few months in 12 of our estate agents' offices, and the response has been quite positive."

However, he adds that the scheme will only work if all those involved in the house-buying chain sign up to it. "We would like the Government to make the seller's pack mandatory," he says. "Otherwise the sale will only move at the pace of the slowest link in the chain."

One problem the Government will have to address is how sellers will pay for the pack, which could cost up to pounds 500. Mr Dunsmore-Hardy thinks mortgage lenders may be keen to subsidise packs. "A number of lenders currently pay towards valuation costs if you remortgage, and some offer cash back with the mortgage. We think that in a similar way they could reduce the costs that vendors would have to pay with the new system."

But nothing short of the Scottish system will stamp out gazumping. Mark Jones, a photographer's agent in London, was ready to act quickly but still lost his flat. "I saw the flat twice and put in an offer the same afternoon," he explains. "My offer was accepted and the vendor seemed quite happy to get things moving." Mr Jones contacted his lender to get a valuation done, and instructed his solicitor, but after a couple of weeks it all went quiet.

"After speaking to my solicitor, who was having trouble getting a contract from the vendor, I spoke to the estate agents," he says. "They checked it out and told me the flat had been sold three weeks earlier."

The vendor had accepted a higher offer from a private buyer just two days after he'd agreed the sale, leaving Mr Jones pounds 600 out of pocket.

If you can't wait for improvements to the house-buying process to be implemented, you can insure yourself against being gazumped. There aren't many providers in this market - the two main ones are Legal & General and the Lambeth building society. Policies cost between pounds 15 and pounds 30 for a three-month period, and cover legal and survey fees up to certain limits. It won't deal with the heartache, but it should mean you don't lose out financially.

Lambeth BS, 0171-928 1331; L&G - contact L&G estate agents.

HOW TO BEAT THE GAZUMPERS

Save as much as possible for a deposit: some sellers are rejecting offers from buyers who need to borrow all or almost all of the asking price for the house. A surveyor's valuation is often lower than the market price, but lenders will use the surveyor's figure. This can leave buyers unable to raise enough cash to buy the property.

Get a mortgage offer and set up a solicitor to act for you before you make any offers. A written mortgage offer shows you are serious, and if you get into a contracts race, speed counts.

Visit agents when they are less busy and develop a relationship. Allow them to show you the property that's been hanging around for ages. And phone every day.

If you are a seller looking to buy in the same area, use the agent with the best choice of local properties. Agents act for their clients, so if something good comes on to the books, you'll have a better chance of snapping it up.

Look around the area. This is the best way to spot new properties and get in there first. Often "for sale" signs go up before a property is marketed elsewhere.

Get to know the vendor: if you can make a personal connection with the person selling a property, he or she is less likely to behave in an appalling manner.