Whether you’re buying or selling a house, chances are you’ve heard of the term ‘gazumping’ at some stage. But have you heard of its antonym, gazundering?
Whether you’re buying or selling a house, chances are you’ve heard of the term ‘gazumping’ at some stage. But have you heard of its antonym, gazundering? Whereas gazumping is something that buyers have to watch out for, gazundering is something that can negatively impact you when you’re selling a house. In this article we’ll walk through everything that you need to know about gazundering. We’ll explain what it is, how it differs from gazumping. We’ll also discuss its legality and whether or not gazundering can ever be fair. Finally we’ll talk about why gazundering happens in the first place, and what steps you can take to avoid gazundering when you’re selling your house.
Looking for some specific information about gazundering after a survey? Or how property chains can increase the likelihood of being gazundered? Use the menu below to navigate through the article more easily. Or, you can read on for our entire guide!
Gazundering takes place when a buyer reduces their offer at the last minute. Usually just before contracts are exchanged and the sale of the property is legally binding. So much has been invested into the property sale at this point, selling a property is costly, and can take a long time.
You can imagine the frustration that vendors feel when the offer is reduced at the last minute. At this point the seller of the house or flat really has two options, either accept the reduced offer and continue with the purchase, or refuse it and potentially go back to square one in the selling process. Many vendors understandably feel pressured into accepting the offer once they’ve got to this point.
The HomeOwners Alliance conducted a study that surveyed 2,000 people about the practice of gazundering. It revealed that sellers were becoming increasingly concerned about it. 45 percent of respondents revealed that they were worried about gazundering. This was particularly prominent in the South West, London, and the West Midlands. In these regions just over half of property sellers were worried about gazundering. To combat this, an exclusivity deposit can be paid by the buyer as soon as their offer is accepted on a property.
As mentioned before, gazumping is where a property seller accepts an offer or bid from a second buyer that is more attractive (either in terms of price or position) than the offer that they initially accepted. This primarily affects the buyer of the property. It leaves them in a position where they have to either increase their offer or sell their position by completing more quickly on the transaction.
Gazundering is the opposite of gazumping in the sense that the buyer is the one calling the shots. The property buyer reduces the offer at the last minute and then leaves the property seller in the position where they can go and try and find other offers for the property, or they accept the reduced offer.
If you live in England or Wales then (unfortunately if you’re a property seller) gazundering is completely legal. No property sale is legally binding until the moment that contracts are exchanged between the buyer and seller.
Gazundering is far less likely to happen if you live in Scotland. In Scotland a sale becomes legally binding once an offer has been accepted. So if the buyer backs out by reducing their offer then they lose their deposit. It is possible to back out of a sale in Scotland if serious issues become clear after the contract has been entered into. But Home Reports are conducted on Scottish properties before they’re listed. So the likelihood of this happening is low.
Whilst the legal status of gazundering is straightforward, its morality is less clear cut. Now we’ll discuss whether gazundering can ever be fair to a property seller.
The answer to this question really depends on the situation. Because gazundering is often associated with opportunistic buyers who want to exploit a seller in a vulnerable situation, the gut reaction may be to assume that it’s always unfair. Certainly if the buyer is purely looking to exploit the seller’s weak situation then it could be argued that gazundering is indeed unfair. Sellers will always want to avoid this kind of gazundering.
On the other hand, if the prospective buyer reduces their offer in response to issues that emerge in the survey, such as subsidence, then it could be argued that this is fair. Issues that are surfaced in surveys usually result in a cost to the buyer as they will be the one who has to fix them. So the buyer reducing the offer to reflect that additional spend is understandable.
We can’t be the moral authority on gazundering, but it’s definitely more understandable in some situations than others.
Gazundering can happen for many reasons. We’ve listed and explained some of the most common ones here.
If the buyer has seen a property that’s their dream home then it’s not uncommon for them to make an offer that they later regret. They could do this because they weren’t thinking clearly at the time. Or they could make a high offer in order to get the property taken off the market and secure it, all the while having the intention of reducing the price.
When it gets closer to the exchange of contracts the buyer might get cold feet and start to regret their offer. This is where they may gazunder to feel like they are getting a fairer price than they initially offered.
Surveys are typically conducted as part of the conveyancing process to assess the condition of the property and surface any issues that may affect its value. There are different types of surveys that give different levels of detail about the property’s condition. The most thorough survey you can get is called a structural survey, which will give an in-depth report of the structural integrity of the building.
If the buyer has a survey carried out and it surfaces issues that will give rise to significant costs in the future they may reduce their offer or negotiate based on these costs.
If the buyer is involved in a property chain (i.e. they’re buying and selling a property at the same time) and the chain collapses, it can create problems. If the sale of their property falls through or is held up, it might impact their mortgage offer. In turn, this could affect their offer on your property and lead to gazundering.
No individual can control the housing market. Sales can take months to go through. If the housing market takes a dramatic downturn during the period between offer and exchange then the buyer may have no choice but to reduce their original offer. Otherwise they could end up in negative equity with their mortgage from the outset.
Mortgage offers are typically valid for around 6 months. If the sale takes a long time to progress from being under offer to exchanging, then the mortgage offer could expire. This could mean that the buyer has to take a more expensive mortgage that they’re now unable to cover repayments on. So they might gazunder in order to be able to get a more affordable mortgage.
As a response to the pandemic the UK government introduced a stamp duty holiday in 2021. This ended in September, and led to many buyers reducing their offers for sales that were due to complete after the deadline to make up for the difference in stamp duty costs.
This is probably the most malicious form of gazundering. If the buyer senses that the seller is in a weak position with the sale of the property then they may gazunder in order to exploit their position. This could happen either because it had little interest to begin with, or they’re tied into an onward purchase. In situations like this the seller often has no choice but to accept the reduced offer. This can, unfortunately, affect their onward plans.
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