If you’re buying or selling a property in England or Wales, you may have wondered whether a seller can accept a higher offer after contracts have been exchanged.
The quick answer to this question is no, the seller is not permitted to simply take a higher offer and walk away from the deal. However, there is more to it than that. In this article, we explain why a sale is legally binding on both parties at this stage in a residential property transaction, and the consequences of pulling out.
Before exchange of contracts
Prior to exchange of contracts, property sales aren’t legally binding.
A seller might accept a better offer from another buyer. ‘Gazumping’ is the name for this practice.
You should note that while gazumping might be legal in England and Wales, it is seen as poor practice, and typically leaves the original buyer out of pocket after spending money on surveys and legal fees.
After exchange of contracts
Once contracts are exchanged, both buyer and seller are committed to completing the transaction on the agreed terms. If a seller attempts to withdraw in order to take a higher offer, they are in breach of contract.
There are consequences for the seller in this scenario, which we’ll come to later in this article.
Property transactions in Scotland
There is a significant point of difference in the exchange of contracts for residential property transactions in Scotland.
North of the border, the exchange of formal letters is known as missives. This creates a legally binding contract at a much earlier stage in the process, which makes gazumping very rare.
The risks
A seller faces serious consequences if they attempt to pull out after the exchange. There are risks including; loss of deposit, a claim for damages by the buyer, and the seller being held liable for the buyer’s costs (such as legal fees and survey costs).
We at Bennett Smith are conveyancing solicitors that North Wales can rely on. We provide clear and practical advice on all aspects of UK residential property law. Reach out to our friendly team today on 01248 671994.
