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, causing the original 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 and start the whole process from scratch.
The reasons buyers do this will vary from person to person – some people will genuinely have a valid reason to lower their offer, 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?
If you're buying property in England, Wales or Northern Ireland, then yes it's legal. 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 exception 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. There are some things that might indicate your buyer is more likely to see the offer through, such as:
- They are not part of a chain - if your buyer is not trying to sell their old property at the same time, they are less likely to suddenly need to drop out of the sale or reduce the offer because your transaction does not depend on theirs running smoothly.
- They have a mortgage in principle - this shows that they are likely to be able to get a mortgage to cover the amount they're offering for the property.
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.
However, if the buyer asks you to remove the house from the market then it could be worth doing it. If you don't look like you want to commit, why would your buyer want to?
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 March 2020