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Gazundering - what it is and how to avoid it

Buyers and sellers seem to be finding more new ways to play the game and turn situations to their advantage. Unfortunately, when this happens, someone else in the chain can very easily lose out.

Gazundering - what it is and how to avoid it

To put a name to some of these sneaky strategies, property experts have coined the terms gazumping and gazundering. Gazumping is when a seller goes with a higher offer last minute, leaving the buyer to lose out. Gazundering is rather a turning of the tables.

What is gazundering?

Gazundering refers to a buyer reducing their offer in the final stages of the transaction just before the exchange of contracts. This leaves the seller with a tricky decision to make;  accept the last minute lower offer, or put the property back on the market.

The reasons buyers do this will vary from person to person – some people will genuinely have a valid reason to pull out, whereas others simply have a change of heart or their nerves get the better of them. Whatever the reason, the outcome seldom differs, and occasionally people are prepared to pull some rather ruthless moves to try to get a better deal.

Is it legal?

It is. Just like gazumping, there is nothing in the property process that prevents this from happening. As no official contract has been entered into right up to the date of exchange, there is nothing to stop either side from taking advantage of the situation. The longer the lead up to exchange goes on, the more at risk you are.

The exemption to this is when buying property in Scotland - from the moment of making an offer and having it accepted, a legal contract is entered into. Usually in Scotland the understanding is that by backing out you forfeit your deposit (or if the seller backs out they are obligated to pay that amount to the buyer). The only reasonable way to break a contract is if issues with the property become clear. But as the Scottish system uses Home Reports, which are done in advance of a property going on the market, this is less likely to happen.
 

If you are selling your home, it is impossible to prevent this from happening, but you can at least reduce the likelihood by following these suggestions.

Choose your buyer carefully

If you are lucky enough to have more than one offer on your property, remember that a higher offer isn’t guaranteed to be better in the long run. Do a bit of research on your buyer and choose carefully. You may encounter fewer problems if your buyer is not part of a chain and already has a mortgage agreed in principle. 

Keep things moving

If you can complete the transaction as quickly as possible, there is less chance of things becoming stale and falling through. Try to aim for a timescale between 6 and 8 weeks to complete.

Keep communication open

If you can cultivate a good rapport with your buyer, it may help to deter them from letting you down when it matters most. Stay in contact with your estate agent to give them regular updates to reassure the buyers that things are moving steadily on and make sure that they are notified of any new developments.

It’s best to be upfront

Any sensible buyer will arrange to have a property survey carried out before going ahead with a transaction. Therefore, if you know that a surveyor will find an issue with your property, it’s probably best to be upfront about it rather than risk the sale falling through if the buyer suddenly wants to renegotiate on the sale price.

Sometimes renegotiation can save the day, if you can stick with the buyer you have you will avoid having to restart the process of marketing your home and so forth.

If you are a buyer, negotiating a better deal is one thing, but demanding too large a reduction in price could lead to feelings of resentment in your seller which will not help matters if a ‘gazumper’ comes along, or if the transaction does go through, they may decide to remove everything they legally can from the property, including the light bulbs.

Have a ‘plan B’ ready

Remember that no property transaction can truly be guaranteed until you exchange contracts. Because of this, you might be well advised to keep your house on the market even though you think you have a definite buyer. That way, you won’t have to go right back to square one if things don’t turn out as planned.


Ask for a contract

It's rare for a pre-exchange contract to be put into practice, but it is possible. This is called a 'lock out agreement' and it confirms the price agreed for the property, and that the property will be taken off the market. The buyer would put down a deposit (perhaps not as large as their overall deposit, but usually somewhere between £2500-£5000) and if they break their agreement for something other than an issue revealed by the survey, they forfeit their deposit. If the seller pulls out, they have to pay the deposit amount to the buyer. 

These contracts can take time, and are not always appropriate, but they can add a significant degree of security if you are concerned about your sale going through.

You can read more helpful suggestions for buying or selling your home in our moving advice section.

Updated June 2018

Comments (1)

  • Dennis Butcher

    posted on 11 Aug 2013

    This does of course depend enormously upon your own personal circumstances. We are about to have our house put onto the market and the agent (well more than one actually) priced it at about £10k above what we had thought it realistically was worth. Then again we do not have to move, are in no chain and can be prepared to wait. So If a buyer offered us a lower price that we accepted, then almost to exchange asked for a reduction, then he'd be the loser. Simply because it would not make much difference to ourselves. Maybe I am attuned to this as this is what I did in a former life; so have acquired some skills in the negotiation process. The other side of the coin is if you were made redundant, had to move as you found work in another area, had no other buyers except the one and he played this upon you. Now that is a position which I would not like to be in.

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