© 2017 by Uzège Transactions et Développement

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Can you lose your house to overbidding?

You may have heard about people having their dream property snatched away by a competitor with a higher bid, just before exchange of contracts – after they already had invested time and money to prepare their purchase.

 

This practice doesn’t exist in the USA because a written offer, when accepted and signed by the seller, is usually binding on the seller. It is common in Australia or in the UK (in 2017 it happened for 3.6% of offers), where it is called gazumping (from a Yiddish term meaning “overcharging”). It is only possible in countries where there’s no binding sales agreement until actual exchange of contracts.

 

Not possible in France

 

Strictly speaking gazumping is not possible in France. French law is protective of buyers: once the compromis de vente (the provisional sales contract), has been signed by the parties, the vendor cannot pull out of the sale, unless they pay a 10% penalty (and risk being taken to court if they bulge), whereas the buyer has 10 days to change their mind without any penalty.

 

Protect yourself

 

However, the period after a verbal price agreement and before the initial sales contract could be dangerous because sellers’ agents have a strong incentive (their fee) to find a buyer who can make a higher offer before the compromis de vente is signed. To reduce the risk drastically, and protect you during that period, it can be a good idea to sign an official offer (“offre d’achat”).

 

Under normal circumstances, if it clearly describes the elements of the deal (property and location, parties, price and conditions, time frame for completion starting with the compromis), such an offer can be brought in front of a judge in case the seller changes their mind. 

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