Oh no. The return of that dreaded 'G' word

With a property boom comes a growth in gazumping. But are the estate agents to blame?

Each time we experience a property boom, for whatever reason - genuine prosperity, shortage of property or simply ten years since the last one - gazumping becomes the current bugbear, and the ranting and raving begins. Like joyriding, it is a cute word for a dirty practice, and it's a good one for the popularity of any minister, especially in a new government.

Nigel Griffiths, the minister for consumer affairs is, somehow, planning to outlaw gazumping. This won't be newsworthy until he has achieved it. Seasoned house-buyers have been clamouring for something like it for years. And each time the market surges forward a new band of purchasers find out what it's like to spend a small fortune on searches, surveys and the rest, before losing out to a higher bidder.

The estate agent is often blamed, and solutions will only be effective with the commitment of the agent. But why shouldn't he be committed? Agents want a quick turnover as in any other business. Is it worth it to aid and abet a higher bid for the sake of pounds 50 or pounds 100, if the original sale is already in progress? He is only the middle man and sharp practices or otherwise, ultimately the seller is responsible. Of course, no-one will believe the estate agent is innocent, with "ringfencing" being the word of the moment. This is the practice of taking payment from buyers not to expose a property to anyone else.

However, reputable estate agents profess no knowledge of this practice, even among their less reputable counterparts. But then they would, wouldn't they? Last week the Office of Fair Trading warned agents that they could be banned for life for malpractice. But "calling for the industry to regulate and license itself is futile," says George Pope, of estate agents John D Wood. "Estate agents in this country do not need professional qualifications, and the business is regulated by a number of different bodies, to which no one agent has a duty to belong. This is a government issue."

But, tired of their current standing in the public's eye, only one up from traffic wardens, and probably below tax inspectors, agents are already getting together to provide a ombudsman service for an independent complaints procedure.

Why should a house purchase, the greatest investment most of us make, be so hit and miss? The estate agent takes the flak because he is the piggy-in-the-middle with the expertise to guide us through the system. But he generally wants to make a sale in the shortest, least arduous way possible, and for him gazumping delays a sale and creates very dissatisfied customers.

Nigel Griffiths is calling for a system similar to that in Scotland. Under Scottish law, surveys and local authority searches are done before a binding offer is agreed. But if the offer has been tentatively agreed before hand and is then turned down, the buyer will still be out of pocket.

A system currently under consideration is the "vendor survey" whereby the seller commissions the survey and search, to be made available to all prospective buyers. Of course, this means surveyors miss out on being paid for wasted surveys, but why should a buyer pay for something which, for him, if he loses the purchase, is a totally useless document, but for someone else will be worth pounds 500. And a search is a search. No solicitor is going to reveal anything different in the space of a few weeks.

But a vendor survey may not ultimately prove popular or beneficial to the purchaser. A surveyor acting for the vendor may come up with a different survey than one acting for the purchaser.

When buying a second-hand car, for many people the second biggest payout in their lives, the dealer may provide a warranty. But for peace of mind a careful punter will pay for an independent mechanical check.

Gazumping is a term solely associated with losing out to a high bidder. But what about losing out to a faster purchase? If there is a race to completion for a desirable property should the vendor be expected to pay the expenses incurred by those losing the race?

The Royal Institute of Chartered Surveyors (RICS) appreciates the public's dissatisfaction with the present system, but does not consider the Scottish system as a viable alternative. And George Pope, acting as a spokesman for RICS does not advocate the vendor survey idea. "The industry has always taken the view of 'caveat emptor' - buyer beware. If a survey has been provided by the vendor and then problems develop later, who is responsible?" For modern, cheaper properties, and certainly those covered by NHBC guarantees or similar, a vendor survey may an option. But for properties at the upper end of the market, and much older properties, wouldn't most buyers would want a detailed survey commissioned by themselves for peace of mind? Is there really any practical alternative to the current system? The basic idea of a non-returnable deposit is sound, as with any purchase, but no other purchase involves "the chain".

Once a sale has been agreed, with the survey and search deemed satisfactory, a binding deposit can be put down, with a completion date agreed. This can then be instigated throughout the chain. With this system, the only option is for the vendor to provide the survey, to prevent any loss for the purchaser if his offer is refused. Where this system could fall down is if the chain is broken by unforeseen circumstances - death, sudden unemployment or the like. This would then have to lead to the birth of an insurance scheme to cover such eventualities.

Property purchase is not necessarily straightforward. There are leaseholds with subleases, and restrictions which aren't revealed until close legal examination. For a buyer wanting to pull out under these circumstances, a binding deposit would be unfair.

It has been suggested that only in the area of homebuying is it open to the vendor to decide he can do better by ditching one purchaser in favour of another. Far from it. This is the case in every area of private sale. Shake hands, and "my word is my bond"? Not when an extra few thousand pounds is at stake.

A house sale is a unique transaction in that it involves a huge investment undertaken by private individuals with often no other experience of business. Factory workers, school teachers, doctors and dentists, all have expertise but good business sense and good business morals may be lacking when it involves such an emotional issue as a home. The only area where a house- buyer is reasonably secure is purchasing in a new development, from a reputable developer. On a par with shopping in a department store, instead of through the small ads.

Gazumping has only been a serious issue in two heated periods. In the late 1980s before the housing market crashed, and for the past 12 months. The period in between saw a great deal of foul play from the purchaser, as house-owners struggled to sell. Where is the protection going to come from there? Can inverse gazumping be applied to the purchaser pushing the price downwards as he toys with two or three properties?

Protection across the board can only be achieved by the vendor and purchaser having a binding agreement between them. Hugh Dunsmore-Hardy, of the National Association of Estate Agents, favours deposits from both sides, which may be forfeited if either defaults. And this would certainly protect the estate agent from accusations of foul play.

Gazumping will always be an issue where the vendor has the power. Outlaw the word, maybe. But it will be hard to invent a suitable system to outlaw the act. "I consider that the system is as right as we are ever going to get it," says George Pope.

"How can anyone prevent a vendor from striving to get the maximum amount for his property? If an agent advises the vendor to accept an offer of pounds 200,000 and then two weeks later, someone offers the asking price of pounds 210,000 - what would you do?"