The Glossary
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The
Letter G
This
section provides information on terms and phrases beginning with
the letter G
At the grabber we know finance is full of
confusing terms and phrases, and so on this page we explain:
Gazumping |
Guarantor
Gazumping is the term is used to describe when a second offer
for a property gets accepted, when a first offer has already
been agreed in principal. In most property sales three groups of
people are involved these are sellers, buyers and agents. The
sellers want the highest price possible, the buyers want the
lowest price and the agents work for a commission so the higher
the price the higher the commission. These three groups of
people want different things and this can lead to conflict such
as gazumping.
Buyers. For buyers here is what happens
with gazumping.
The buyer finds the property they want, make an offer and
verbally agree on the price with the seller. Sometime later, the
agent says another buyer wants to buy the property - someone
else offered more money. The original buyer has been gazumped.
The buyer may be given the chance to match or better the
increased offer or get no chance because the home is sold and
have not been asked if they would be prepared to pay more.
Buyers should be careful not to offer too low a price.
Understand that the lower the price offered, the higher the risk
that another buyer will offer more and gazump. If it is at all
possible try to meet the sellers, it is hard for sellers to
gazump if they meet the buyer and like them. Buyers can count on
nothing being certain until the exchange of contracts. Between
the time the sellers verbally agree to sell and the time they
sign the contract, lots of things can happen.
Sellers. For sellers here is what happens
with gazumping.
When selling property it is only natural to want to sell to the
buyer who offers the highest price. But what if the seller
verbally agrees to accept a price from one buyer and then
another buyer offers a higher offer. The seller may not have
realised, at the time of receiving the first offer, that someone
else was prepared to pay more.
For the seller this is a difficult ethical dilemma. It is easy
to say morally that sellers should honour their word. In
practice it is not that easy, should the seller still be bound
to honour their word and lose thousands of pounds? The seller
has no legal obligation until the contract is signed.
Agents. For agents here is what happens
with gazumping.
When agents are employed by sellers, they have a duty to get the
best price and to protect the value of the sellers property. The
agent also has to inform the seller of a second offer for a
property even after a first offer has been verbally accepted.
If an agent does not pass on an offer to a seller, the agent
could be in professional trouble.
The agents do not own the property they sell. They are just paid
agents - the people in the middle of the transaction. The agent
should inform the seller they have no legal obligation until the
contract is signed.
A guarantor is a person or group that provides security for a
finance product, be this through cash or providing the lender
with additional security. A guarantor undertakes that he will
repay a debt incurred by another person to a creditor if that
person cannot or will not pay their indebtedness. In the case of
co-guarantors each guarantor will be fully liable for the total
outstanding amount. It is up to the guarantors to resolve their
respective obligations between themselves. When becoming a
guarantor remember you are fully liable for the outstanding
amount, so caution is advised before agreeing to help finance
others.
Property Buying
Often nowadays due to the increasing house prices a property
buyer may find lenders unwilling to lend them a mortgage loan
sufficient to cover the value of the property. They may even be
turned down on their mortgage application perhaps because of a
problem credit rating. In this case the buyers parents could
become guarantors on their mortgage loan and thus enable them to
step on to the property ladder. Or the parents could look at
equity release to raise the shortfall in funds required from
their own properties equity.
For UK residents after a mortgage or information on mortgages the Grabber has a
mortgage section on it, or for those visitors interested the
Grabber has a section on
equity release.
Got a piece of jargon you want explaining, it's time to let The Grabber loose.
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