Don’t Get ‘Gazumped’ : First-Timers Survive Home-Buying in England

While all our friends were buying houses in Los Angeles, my husband and I staunchly continued to rent, becoming something of an oddity in our social circle. So it surprised everyone (ourselves included) when we moved to London six months ago and decided to buy an apartment right off the bat.

We wanted to buy for a number of reasons: rents are very high here, home prices and interest rates are at an all-time low, and we are both in our mid-30s and it just felt like the right time to buy a place to live.

Ah, if we had known then what we know now. . . .

Lesson No. 1: We had to learn the difference between “leasehold” and “freehold.” With leasehold, we would own the apartment or house, but the land on which it sits would be owned by someone else--ancient nobility or rich executives--and leased back to us for a fee.

Although the amount can be nominal, the real concern is the length of the agreement. Anything less than a 50-year lease could spell trouble; banks may be unwilling to lend a mortgage or it may prove difficult to resell. That’s because once the lease runs out, the tenants must negotiate an (often costly) extension--or risk losing the right to the property.

With a freehold, however, we would buy the right to both the building and the land. But there are “shares of freeholds” and “full freeholds,” and by the time that was all sorted out, we were ready to live in Victoria Station to avoid the whole buying process.

Lesson No. 2: We found out that unlike in the United States, here one doesn’t sign up with one “estate agent”--the equivalent of the American real estate agent--but with as many as possible. There is no such thing as multiple listings. And more than one agent can represent one apartment or house.

Generally, estate agents sell property only in the area they are located in. So we trudged up and down the streets of London seeing one estate agent after another. They would eagerly take our “details”--name, address and what sort of place and price range we were interested in. They handed us a list of flats available. Then we would, almost invariably, never hear from them again.

Lesson No. 3: Estate agents are not licensed here and have very little to do with the actual negotiations of house-buying. Rather, they seem to serve as the key-holder for the seller. In fact, the estate agents rarely shepherded us from house to house. Rather, they would either make an appointment to have us show up when the owners were home or hand over the keys and point out the directions on a map.

While this lack of assertiveness may at first seem attractive compared with the aggressiveness of some American realtors, it soon became frustrating. It also may have to do with the fact that estate agents usually make only about 2% to 2.5% commission on every sale.

In the area we were interested in buying, I signed up with eight estate agents--and four in other areas. I received mailings or phone calls from three of them over a four-month period. I began to suspect they were paid by how many details they collected, not how many houses they sold. That led to. . . .

Lesson No. 4: Call the estate agent everyday.

We assumed estate agents’ lackadaisical attitude was simply a quaint cultural difference--appealing even in that they trusted people off the street with keys to unoccupied but fully furnished houses--but that when it came time to close the deal, they would swing into action.

Yeah, right.

When we first made an offer on a flat, the estate agent said, “OK,” and smiled wanly. And we didn’t hear from him for several days. The offer was eventually refused, but the estate agent made no effort to negotiate with either side. His role seemed to be solely to relay the offer from us to the seller and his response to us.

The next time we made an offer directly to the owners, bypassing the agent altogether. When I told the estate agent the offer had been accepted, he said “Great!” Knowing that in the States realtors often rushed to homes at midnight to clinch a deal, I waited expectantly.

There was a long silence.

“So, what do we do now,” I asked.

“We’ll send you a letter,” he said.

Lessons No. 5 to 100: Everything takes time, and everything is done through the mail. The telephone and fax machine are considered slightly suspect and used only in emergencies.

So for weeks we waited and waited, biting our nails and dreading letters from friends that would open with, “I suppose you’ve already moved into your new flat. . . .”

For in England, once an offer is accepted, no contracts are signed. Rather, a whole series of steps must be taken--and hundreds or thousands of pounds spent--before the seller or buyer has any legal obligation.

This odd system leads to the ugly custom of “gazumping” or “gazundering.”

With gazumping, a practice common in the real estate boom of the 1980s and now making a comeback, a seller can accept an offer but never take the property off the market. The buyer often goes through all the necessary contortions--hiring a surveyor to value the place, hiring a lawyer to proceed with the documentation--and then learns that the seller has received a higher offer. He tells the buyer to come up with extra money or lose the house. The buyer has been gazumped.

The seller, on the other hand, can be gazundered. That is, again, after several months of work and lawyers’ fees, the buyer can tell the seller that he or she is offering, say, 5,000 pounds less than the agreed-upon sale price. If the seller is desperate to move, he or she often has little choice but to accept the diminished price.

Because several estate agents can represent one house, it has also been known for two buyers to go through the process of purchasing the same place without either estate agent knowing it until it comes time for contracts to be signed.

With the fear of being gazumped hanging over us, we spent the nights pacing the floor of the service flat my husband’s company was putting us up in. Initially they had said we could stay three weeks, “and we’ll see where it goes from there.” We were moving on to three months. My husband’s boss was giving him strange looks at work. The clock was ticking.

To make our first-time buying experience just a little more stressful, we had to decide when to get our furniture shipped from Los Angeles. It would take about six weeks, we were told. Get it too early, and we would have to pay about $45 a day storage costs. Get it too late and we would be making payments on a flat we couldn’t live in.

It shouldn’t take longer than six weeks to close the deal our solicitor assured us. For in England, a lawyer is as necessary a part of the house-buying process as a moving van.

We gave the go-ahead to the moving company. We heard nothing for weeks as our solicitor investigated title deeds, checked out the lease and performed other mysterious functions to earn her fee of about $1,000.

Then the letters started coming. “There appears to be a slight problem with the lease,” she informed us.

I got on the phone immediately. How slight? “Nothing, nothing, just a standard clause that was not inserted,” our solicitor reassured us. “I’m sure the seller will agree to rectify it.”

A few more weeks went by. The seller took this inopportune time to get married and leave on a honeymoon. Meanwhile, our furniture was steaming inexorably across the Atlantic.

Our solicitor was still confident there would be no problem. Unfortunately, she was wrong. When the seller--himself a lawyer--returned, he said he did not see the need for the clause. Turns out, we learned, getting a fast education in what being a freeholder means, because our flat-to-be was a portion of a freehold, the rest of the tenants in the building had to agree to any lease change. And the seller did not want to take the time to drive down from his new home in Leeds and organize a tenants’ meeting.

At that point negotiations broke down almost completely. Our solicitor said we would have trouble selling the place if we did not get the lease remedied. The seller refused and put the flat back on the market--at $9,000 more than we had agreed upon.

All around panic ensued. But through some quick work by our solicitor--meaning actually using the telephone rather than the post--and an extra $900 more in lease insurance and the like, we moved in just a few days after our furniture arrived.

Although it was an agonizing process, we were relatively fortunate. We were not gazumped, we received a good mortgage and it was three months from the time we made our offer until we moved into our flat. But one thing we’ve decided--we may just become expatriates to avoid ever being gazundered.

Tugend, formerly a reporter with the Orange County Register, moved to London in January with her husband, Mark Stein, formerly a reporter for The Times. Now that they have settled into their flat, their next project will be an exhaustive study of the differences between American and British beer.