In this guide, we’ll tackle common questions regarding gazumping’s similarly-named cousin. What is gazundering? Is gazundering legal? How can I avoid being gazundered? We’ll explore some of the reasons it happens and what you can do if you are on the receiving end of it.
Please don’t hesitate to contact Think Plutus if you have any questions or concerns – our team is always here to help.
What is gazundering?
In a nutshell, gazundering is when a buyer unexpectedly lowers there offer right before contracts are about to be exchanged. The seller, conscious that refusing this lower offer could plunge them right back to square one and cause the entire chain to fall apart, feels pressured to accept the lower offer.
Where gazumping has a negative effect on the buyer, gazumping is detrimental to the seller. However, it is not always as simple as the buyer being less than ethical.
Is gazundering legal?
Unfortunately, there is no law against gazundering. There is nothing to stop a buyer from lowering their offer at any point before the exchange of contracts. This raises the question of whether gazundering is ethical and, while it is often an unfair thing to do, there are often mitigating circumstances that are behind it.
That said, there will certainly be cases where a ruthless buyer knows the seller is a vulnerable position once their property has been taken off the market and they are in a chain themselves. The cunning buyer will exploit this situation to try and save themselves a few thousand pounds. This is a cruel thing to do and puts the seller in an unenviable position.
However, it could be that the buyer suddenly discovers something about the property that either reduces, or will reduce, its value. Perhaps property prices have taken a significant dip since the original offer was made. In circumstances like these, it is understandable that the buyer may have reservations about the price. Furthermore, a buyer who is in a chain themselves may have the offer on their property reduced, leaving them with little option but to revise their offer for your property.
Gazundering is a blanket term that doesn’t go into the specifics of why a buyer lowers their offer at the last minute. There are many legitimate reasons why a buyer might decide to lower their offer. Of course, this doesn’t change things greatly for the seller – they are left in a very difficult situation, but it would not be fair to say that all buyers are being unethical by gazundering.
Common reasons for gazundering
- Chain issues: Many purchases are part of a property chain, meaning that your buyer may also be selling at the same time. This means they are vulnerable to gazundering as well, and if it happens to them then it can cause a chain reaction as they are unable to pay what was agreed in the initial offer.
- Survey results: If a surveyor identifies defects in the seller’s property that could cost the buyer thousands of pounds to address, this would warrant a revision of the price they are willing to pay.
- Miscalculation: It may be inconvenient, but the reality is that errors happen. An overzealous buyer might go in thinking they can afford more than they can, thus offering more than they should. Later on in the process, when everything is scrutinised, they learn that they can’t afford what they initially offered.
- Solicitors and/or agents dragging their heels: The speed at which a sale happens can negatively impact both parties, so it is crucial to have good people on the case. If there are delays in a sale being completed, the buyer’s mortgage offer may expire, causing them to have to reapply. Unfortunately, there is no guarantee they will get the same deal that was available when they made their original offer.
- Change of heart: With the ever-present threat of gazumping, many buyers keep searching the property market even after having an offer accepted. They may find another home that they feel is better value for money, prompting them to lower their offer to you.
Should sellers accept a lower offer?
This will largely depend on the circumstances of the seller and the general health of the property market. Ultimately, it is your decision whether a lower offer from a buyer is acceptable.
When it’s a buyer’s market, gazundering is more commonly viewed as an unethical practice. Unfortunately, in these circumstances, sellers are more likely to feel they don’t have much choice but to accept. Their property may have been lingering on the market for some time with little interest, or they may simply need to sell as quickly as possible with little hope of someone else appearing and offering more money.
When the market is more even, sellers may feel freer to simply reject the lower offer and start over. It will be frustrating, but it’s likely to be the buyer who comes off worse in this case. They will have already spent a significant amount in fees by the time the exchange of contracts is imminent, and they will have wasted their own time as well as yours.
In an ideal world, you would be free to act entirely on principle, but the real world doesn’t always make this possible. Ultimately, the decision of whether to accept a revised offer from a gazunderer comes down to personal choice, heavily influenced by individual circumstances and the state of the market.
What can I do to avoid being gazundered?
There isn’t much you can do to avoid being duped by an unscrupulous buyer looking to save some cash except reject the lower offer. But there are precautions you can take to reduce your chances of a genuine buyer being forced to lower their offer:
- Choose a buyer without a chain: A good offer is always worth considering, and you shouldn’t reject buyers simply because they are in a chain. But if you are spoilt for choice with many interested parties, focus on the ones who are chain-free. They are more likely to proceed swiftly and there is less chance that unforeseen affordability issues will arise that end up being passed on to you.
- Move fast: Keep in contact with your solicitor and ensure they are pressing on with your case. Your agent should maintain contact with the buyer’s solicitor to ensure everything is moving steadily on that side. If you can, keep in touch with the buyer as well. Agents and solicitors often prefer the buyer and seller to have no contact, but it can be helpful to build a relationship and have a regular dialogue to avoid them trying something devious like gazundering.
- Set a date for the contract exchange: At the earliest opportunity, establish a date for when the exchange of contracts will take place. This gives interested parties a target to focus on, keeping the pressure on to get everything prepared.
- Be realistic about the price: If you price your house higher than it should be, the chances of a buyer lowering their offer are significant. A buyer who falls in love with the property may offer the asking price or even higher to avoid missing out on their dream home. Then, when surveys are carried out and the buyer has spent some time thinking about things, they may decide to lower their offer. Set the price fairly and the chances of this happening are lower.
- Don’t try to hide anything: If you are less than transparent about issues with the property or the surrounding area, you dig your own grave. A survey will discover the issues you are trying to hide and most buyers will do their own research into the local area. When the thing you’re hiding comes out, the buyer may withdraw, lower their offer or, even worse, sit on the decision and pull out at the last minute because they decide the new information is unacceptable. In any case, you’ll be left in a difficult and frustrating position.
- Offer to pay for any issues a surveyor finds: If you’ve been honest about known issues but a survey reveals something you didn’t know about, you could consider paying for that work rather than accepting a lower offer. This can be attractive for buyers because they won’t need to worry about arranging contractors for their home from day one. Meanwhile, you could resolve the issue in a cost-effective way that would save money over having to accept a reduced offer.
- Get on top of your finances: Do your maths. Even when a good offer has come in, if you’re in a chain and it’s important to make the move, work out how low you could realistically go. This will mean you are prepared in the event that your buyer reduces their offer – you’ll know how low you can go before the offer becomes unfeasible.
- Get a good agent: A good estate agent will know what to do about a buyer who is just trying their luck. They will also have experience in keeping everything on track and maximising your chances of making that all-important sale.
That’s it for our gazundering guide – we hope it has been helpful for your situation.
If you have any further questions, or would like to discuss your situation in detail, please feel free to give Think Plutus a call. We can help with any other property questions as well. As expert mortgage brokers, we’ve seen it all. Our advice comes from a wealth of experience and expertise in the property market and we will be happy to discuss your options and help you find the right way forward.