The property market has been buoyant for a couple of years or more. So gazundering has been pretty much unknown. Now the property market is looking more uncertain some experts suggest that gazundering is making a comeback.
Here we will look in more detail at gazundering and what to do if you are affected by it.
What is gazundering?
In simple terms gazundering is a situation where a property buyer makes an offer to buy which the seller accepts. The sale proceeds in the normal way. Then, at a late stage, the buyer reduces their offer. In extreme cases this can even be on the day contracts are due to be exchanged.
The seller then has to decide whether to accept the reduced offer. Or whether to let the sale fall through and maybe put their property back on the market.
Gazundering is the opposite of gazumping. With gazumping, a seller accepts a buyer’s offer and then later accepts a higher offer from another buyer.
Why does gazundering happen?
It’s often thought that gazundering is a deliberate move by a buyer. But gazundering can be both a deliberate ploy and a situation that buyers are forced into, even though they would rather not do it.
When done deliberately a buyer might make a high offer on a property in order to get their offer accepted and freeze out other buyers. They might have every intention of reducing their offer at the last minute in the hope of getting a bargain.
But gazundering can be far from a deliberate ploy too. In a cool market, where prices are falling, a buyer might find they can no longer raise a mortgage to cover the amount they offered and so have to reduce their offer. Or they might have ‘buyer’s remorse’ and realise that they have offered to pay too much. If a buyer is in a chain, they might be pushed into gazundering if they are gazundered by their buyer.
Ways to avoid gazundering
Price your property correctly in the first place. Properties that are priced unrealistically are more likely to fall victim to gazundering. Bear in mind that prices appear to be softening in some places, so an asking price that was realistic six months ago may not be realistic today.
Always take advice from estate agents on both appropriate asking prices and likely actual selling prices.
Make sure the property you are selling is in good condition before it goes on the market. Buyers might use any faults or problems, including those revealed by a survey, as a reason for reducing their offer. If there are no significant problems they won’t be able to use that as a reason or even an excuse.
Beware of unrealistic offers. Offers that are way above a realistic selling price increase the risk of being gazundered .... whether through no fault of the buyer or as a deliberate act.
Be cautious about taking a property off the market. Some buyers might request that you take the property off the market, perhaps as an informal condition of offering a certain price. But it may be better to decline to do this. If the property stays on the market you should get enquiries and perhaps also offers from other parties who you can fall back on if you are gazundered.
Exchange contracts as quickly as possible. Once contracts are exchanged the buyer can no longer gazunder. Sellers can speed exchange by choosing a solicitor/conveyancer who is proactive and by collecting together all the information their solicitor/conveyancer might ask for before putting their property on the market.
Accepting an offer from a cash buyer or first time buyer may help to speed exchange and so reduce the risk of gazundering. But bear in mind cash buyers and first time buyers can gazunder too!
What to do if you are gazundered
Decide in advance what you will do if you are gazundered. Decide whether you will be prepared to accept (and can afford to accept) a reduced offer from the buyer. And what the minimum you are prepared to accept will be. Bear in mind that you will already have incurred some selling expenses, so it can be cheaper to accept a lower offer than to put your property back on the market and have to pay those expenses again.
You could also try to negotiate with the gazunderer, and try to agree a price midway between their old and new offers.
If you decide to decline a reduced offer decide what you will do next. You might put the property back on the market immediately, go back to other prospective buyers, or decide not to sell at all. If you decide to find a new buyer a good, proactive estate agent will be worth their weight in gold here.
* If the property is in Scotland remember that property law is different. Gazundering is much less likely to happen.