How to Protect Yourself from Gazundering: A Guide for House Sellers
When you’re selling a house or flat then there’s always a risk that you could be gazundered. Here we’ll explain exactly what gazundering is and how you can protect yourself from being gazundered.
What Gazundering Means
Gazundering is a situation when a seller has accepted an offer on a house or flat from a buyer. Then the buyer reduces that offer, often at the last minute.
Gazundering puts sellers in a really difficult situation. They have to decide whether to accept the lower offer, continue with the sale and lose money. Or whether to lose the sale, put their house back up for sale and try to find another buyer.
In a property-context gazunder is thought to be a combination of gazump and under. Gazunder can also be a word for an old-fashioned chamber pot .... something that ‘goes under’ the bed!
The opposite of gazundering is gazumping. Gazumping is when a seller has agreed to sell their house to one buyer and then another buyer comes along and offers more money.
Gazanging is another scenario that can happen in property sales. Gazanging is when a seller decides not to sell their property at all.
When can Gazundering Happen?
Gazundering can happen at any time when you are selling a house or flat.
Gazundering can happen in a cool property market or buyer’s market. Times, when there are more properties for sale than buyers looking to buy mean gazundering, is more likely. Some buyers may take advantage, by gazundering. Or they might worry that they have offered too much, feel that house prices are going to fall, and so decide to reduce their offer.
Gazundering can happen in a hot property market too, however. Some buyers may offer an unrealistically high price to persuade the seller to sell to them, then gazunder at the last minute.
Gazundering is also more likely to happen the longer the house selling process goes on.
In a worst-case scenario gazundering can happen on the day your solicitor plans to exchange contracts with the buyer’s solicitor.
Why is Gazundering a Problem?
Gazundering can be a big problem for house sellers. Gazundering can waste money, waste time, be stressful and create a bad feeling with the buyer. It can mean a seller has to start from scratch to find a new buyer.
Gazundering can be an even worse problem for sellers who are selling a house and buying another one at the same time, especially if they are involved in a chain. A seller who is gazundered may then not be able to afford the house they were planning on buying. Their house purchase might fall through or they might be forced to gazunder themselves.
Gazundering isn’t entirely risk-free for the buyer, however. If as a buyer you try to gazunder and it fails you will lose the money you have spent on house hunting, surveys and legal fees and will have to start looking for a house to buy all over again. Gazunderers also lay, themselves, open to being gazumped by a gazumper!
Good Reasons for Gazundering
Most people think gazundering is a bad thing to do. It’s true to say that some gazunderers do it deliberately to make or save money. They make a strong offer with the full intention of reducing it or gazundering often at the last moment just before exchange of contracts. They know that this is likely to put the seller in a difficult position. In cases like this gazundering is dishonest and deceitful.
It’s important to be aware that there can be very good reasons for gazundering, however. Sometimes genuine and honest buyers can be pushed into gazundering even when they don’t really want to.
- Buyers may gazunder when property prices are falling, or they have seen a similar property they like for much less money.
- Buyers might gazunder when they inadvertently offer more than a house is actually worth, perhaps because they have fallen in love with it. If their mortgage lender values it at less, it might mean they can’t afford to pay what they have offered.
- Buyers might gazunder if they have a survey done and the surveyor finds more repair or maintenance work is needed than they expected. It could be argued that reducing an offer after a survey isn’t technically gazundering.
- Buyers might gazunder if their circumstances change in the time since they made their original offer. This might be if their income reduces. Or if their mortgage offer expires or the mortgage interest rate goes up.
- Buyers might gazunder if they have a house to sell and their buyer gazunders them. That is because they are getting less money for their house they can only afford to pay less for the one they are buying. If there’s a chain involved the whole chain could be affected by gazundering.
Is Gazundering Legal or Illegal?
Gazundering is not illegal. It is perfectly legal for buyers to gazunder by reducing the offer they have made before exchange of contracts.
Gazundering is legal because in law a house is not sold until the contract of sale is exchanged legally. Until that happens the sale is only subject to contract. A verbal or spoken agreement made between buyer and seller is not legally binding.
Gazundering is legal in England and Wales under English law. Gazundering is legal in Scotland in some cases but it is much less common in Scotland because Scottish law on house buying and selling is different.
How to Protect Yourself from Gazundering
Although there is nothing a seller can do to stop gazundering there are a few things you can do to protect yourself from gazundering.
- Price your property correctly when putting it up for sale. Although everyone wants to get the highest price for their house or flat an asking price that is unrealistically high means you are more likely to be at risk of gazundering.
- Tackle any repairs or maintenance your house needs before you put it up for sale. This will remove some of the reasons your buyer might have for reducing their offer.
- Be wary about accepting offers that seem too good to be true. Your buyer could later find that they cannot afford to pay that much, and they may be forced to gazunder. Unrealistic offers could possibly be from a deliberate gazunderer.
- Aim to sell to a cash buyer. While cash buyers can still gazunder there are fewer reasons that might justify them doing it. The sale is also likely to move faster too reducing the risk.
First time buyers or other buyers who are not in a chain are also less likely to find themselves under pressure to gazunder.
- Keep your house on the market, even if you have accepted an offer for it. Even though your property might be ‘sold, subject to contract’ it does not stop you from accepting more viewings or considering offers from other buyers.
If you are gazundered you could find another buyer is ready to step in. If gazunderers know this they may be less likely to do it.
- Move as quickly as possible. Use a solicitor or conveyancer who is able to move quickly. Answer any queries promptly. Don’t be afraid to ‘chase up’ your buyer, estate agent and solicitor or conveyancer if things are dragging.
Aim to get everyone in the process to agree to a target date for exchange of contracts and for completion and to work towards it. The quicker contracts are exchanged the less chance there is that gazundering will happen.
- Sell your property at auction or direct to a house buying service. This can help reduce some of the reasons you could be gazundered.
What to do if you are Gazundered
If you find you are being gazundered there are a few things you can do about it.
- Refuse outright. Tell the gazunderer you’re not accepting their reduced offer and that they will need to pay the agreed price or the sale will fall through. Put your house back on the market. Calling their bluff in this way could prompt them to back down and pay the price agreed.
Be aware that if the buyer doesn’t up-their-offer you will have no choice but to put your house back up for sale.
- Negotiate with the buyer. Renegotiate the price. Suggest that you will accept a lower price for your house that is somewhere between the original price agreed and the reduced price the buyer has offered.
This might be a good compromise if, for example, you have found that your house needs some expensive repairs or maintenance. Alternatively, you could offer to do the work yourself if the buyer pays the original price agreed.
- Accept outright. Accept the buyer’s reduced offer and let the sale go ahead anyway. This might be an option worth considering if property prices are falling, or if the lower offer is still more than the lowest price you would have accepted in the first place.
- Accept but with conditions attached. Accept the buyer’s reduced offer but attach some conditions to it – ideally conditions that will stop any further gazundering and get your house sold fast. For example, you might say you will accept the lower price only if they exchange contracts and complete within a specified number of days.
Have a gazundering action plan: When you are selling your house or flat it is always a good idea to be aware that gazundering can happen to you. So have a plan of action prepared in advance, just in case. Decide what the minimum price you will and can afford to take for your house is. Work out what the cost of putting your house back on the market versus accepting a reduced offer is. Try to find out why the buyer has gazundered. Then you will be in a good position to decide what to do.
There is no wrong or right answer on what to do if you are gazundered. The best advice is to consider all the options and then do what is best for you.