Despite what you may have read, gazundering is nothing new. The phrase itself may only just have started becoming popular but the act itself has been around for years. But, what is gazundering?
In short, gazundering is when a buyer reduces their offer at the last moment, just before contracts are exchanged.
This can happen for a number of reasons but usually ends up with the seller either having to accept a lower price or lose the sale they thought was agreed.
This shouldn’t be confused with gazumping, which is when a buyer is outbid by another party after a sale has already been agreed.
Gazundering, therefore, effects sellers of properties negatively, whereas gazumping effects buyers of property negatively.
Why Does Gazundering Happen?
There are many reasons why gazundering can happen, including:
- Cold Feet – Buying a house is a big decision and if your buyer suddenly doubts whether they can afford the house, they may reduce their offer.
- Bad Survey – If the buyer gets a bad survey back, they may reduce their offer to help them cover the costs of the work that needs doing.
- Pressure From The Chain – If your buyer is in a chain they may have been gazundered themselves and are now unable to pay the agreed sales price.
- Delays – When your property sale suffers delays you risk being gazundered if your buyers’ mortgage offer expires and they need to find a new one
- Competition – Buyers often continue looking for properties ‘just in case’ even after a sale is agreed. If they find one they prefer or is at a better price, they may reduce their offer.
This is by no means an exhaustive list but it does cover some of the main reasons you may be a victim of gazundering.
Is Gazundering Legal In The UK?
In England and Wales gazundering is perfectly legal. The conveyancing process means that no offer on a property is legally binding until contracts have been exchanged – which doesn’t happen until just before you move.
This is partly to ensure both buyers and sellers do not encounter any nasty surprises after agreeing to a deal, but it does create a lot of uncertainty for both parties.
If you are gazundered before you exchange contracts there’s not much you can do. Once contracts are exchanged, the sale price is legally binding which means you would be entitled to refuse and seek legal advice if your buyer attempts to gazunder you at that point.
That means the sooner you can exchange contracts, the sooner you’ll have some protection from gazundering.
As the house buying process in Scotland is different, and transactions become legally binding much earlier, gazundering in Scotland is a much rarer occurrence (though, still possible!).
How To Protect Against Gazundering
Be Realistic On The Sales Price
One of the most common reasons for gazundering is that the initial agreed sales price was too high.
Buying a property can be quite emotional and it’s easy for buyers to get carried away in the heat of the moment and offer to pay too much for a home, especially if a bidding war commences.
Be realistic about the sale price you set and try to be sure that the buyer is serious. Encourage them to have multiple viewings of your home before you agree on a price so you can be sure they are not acting on a whim.
Be Honest About Any Issues
If you know there is damp in the back bedroom or signs of movement in the kitchen, be up-front and honest about them.
Issues like this are sure to be picked up on a survey so hiding them only delays confronting the problem.
Telling your buyer about such problems before they make an offer significantly reduces the chances they will reduce their offer later.
Offer To Pay To Resolve Problems
If your buyers’ survey has picked up on some work that needs carrying out, offer to pay to get the work rectified before the sale completes.
This will often work out cheaper than accepting a lower offer from the buyer and will also help you build up trust with your buyer.
It’s worth doing the work as, even if the sale still falls through, it’s one less potential problem you’ll have to worry about the next time you find a buyer!
Find A Chain-Free Buyer
Of course, you can’t always pick and choose your buyers but, if given the choice, a buyer not in a chain is always more preferable than one who is relying on selling their own property first.
That’s because your own sale can be affected by events happening further down the chain. For example, if your buyer is gazundered on their own property, they might respond by reducing their offer on your property.
Become Chain-Free Yourself
Just as gazundering can occur because of events further down the chain if you are in a chain yourself this could also impact your chances of getting through without being gazundered.
That’s because chains can and do cause delays in the process. Every time there is a delay that isn’t your buyers fault, it increases the chances of them reducing their offer or pulling out altogether.
You can always move items into storage and rent for a while to remove yourself from the chain.
Don’t Delay The Process
Anything you can do to speed up the process and get to the exchange of contracts faster will help you avoid being gazundered.
We’ve already mentioned about becoming chain-free but it’s also worth ensuring all your paperwork is in order and that you’re ready to proceed as quickly as possible.
Appointing a good solicitor will also help you avoid any unnecessary delays.
Build Up Rapport With The Buyers
If you can, exchange contact details with your buyers. Many high street agents discourage this yet by being able to contact each other directly you don’t have to wait for the estate agents office to open to pass messages through a middleman.
Most online estate agents allow you to deal with your buyer directly, thus cutting down communication time and helping you keep things on track.
What To Do If You Are Gazundered
Firstly, don’t panic and don’t take it personally! Sometimes a buyer is just trying it on, sometimes there are genuine reasons why they have had to lower their offer.
Your first step should be to try and find out why you have been gazundered. Once you understand the reason behind it, you may be able to overcome the issues.
For example, if you are being gazundered due to a poor survey, see what you can do to rectify the issues it’s highlighted. If it’s because the buyer has realised your property is over-priced, look to negotiate to a fairer level you’ll both be happy at.
Remember that you’re perfectly entitled to ask for evidence to back up why a buyer feels they need to reduce their offer.
If they are unable to provide proof of the reasoning, don’t be afraid to play hard-ball or even pull out and find another buyer, your stress levels may just thank you in the long-run!
If you do end up pulling out of the sale and need to find a new buyer, check out our article on how to negotiate a higher sales price.