Gazundering is a practice that can add plenty of last-minute stress before you are due to exchange contracts.
We explore what gazundering is and how you can avoid it.
What is gazundering?
Gazundering happens when a home buyer lowers their offer just before you’re about to exchange contracts.
At this point, you’ll be understandably worried that refusing the new offer could cost you the sale and it could leave you struggling to make a decision.
Is gazundering legal?
There’s nothing in law to stop your buyer from dropping their offer before you exchange contracts – although it certainly isn’t fair.
Many buyers who gazunder are exploiting the fact that a property has been taken off the market, and the property chain is reliant on the sale going through.
In most cases, they may be trying to save a few thousand pounds and aren’t worried about the hassle they’re causing.
There are a few exceptions.
A buyer could discover previously unknown or concealed information about your property before exchanging, which could impact its value.
How to avoid gazundering
If your buyer is trying to save some money, there’s not much you can do except reject the low offer and pull out of the sale.
Sadly, there’s no insurance you can put in place to protect against any financial loss due to gazundering (although you may be able to get insurance to protect against gazumping).
But you can take precautions to protect yourself in the event of genuine buyers suddenly lowering their offers.
Target chain-free buyers
You shouldn’t turn away potential buyers just because they’re in a chain, but if you’ve got a few interested parties, it could be worth choosing a buyer who is not in a property chain.
They’re more likely to be able to move quickly, and less likely to encounter financial issues that will impact you.
Set an exchange date
Set an exchange date as soon as you can.
Once there’s a date in place, it gives all parties a target to aim for.
Keep in regular contact with your solicitor to make sure everything is moving quickly and smoothly.
Your estate agent should talk to your buyer’s solicitor to ensure things are also going to plan.
If you can, build a rapport with your buyer so you’re regularly communicating, and they may be less likely to lower their offer at the last minute.
Be realistic about price
If you set your price high, there’s a greater chance that potential buyers will seek ways to save money.
A buyer may also fall for your property and make you an offer to secure their dream home, only to encounter issues highlighted by the property survey later on.
Get an experienced estate agent
An experienced estate agent will know how to handle buyers who are pushing their luck and are more likely to help you secure a hassle-free sale — and a fair price for your home.
Don’t try to hide any problems
There’s no point in concealing issues with your property, as a survey will find them.
Your buyer may withdraw at this point, lower their offer or be upset at any hidden surprises and pull out at the last minute.
Do your sums
Be prepared for the worst-case scenario by working out the lowest offer you can accept.
If your buyer tries to gazunder, you’ll know how low you can realistically go.
How does gazumping work?
According to research by MFS in 2022, 31% of homeowners in England and Wales have been gazumped at least once over the last decade.
Gazumping is when someone makes a higher offer on a house that you are planning to buy, and that offer is accepted.
Unfortunately, this can happen at any moment, up to the point that you exchange contracts.
A seller may be trying to maximise their sale price, but it can also be a risk if your sale is delayed.
Is gazumping legal?
Yes, gazumping is legal. Your offer might have been accepted, but it’s not legally binding until you exchange contracts.
This is fairly late in the sale process, so you may have paid for a survey, conveyancing and arranged a mortgage, so you could be seriously out of pocket.
How to avoid gazumping
There are some tried-and-tested things you can do to avoid the all-too-common problem of gazumping:
Get insured: If you take out home buyer protection insurance, you won’t lose out too badly if your seller accepts a higher offer, as you can claim back some of your fees.
Be prepared: Make sure your mortgage is sorted, and your solicitor has organised any documentation to avoid delays — you don’t want your seller getting impatient and looking at other offers.
Get moving: Try to move the process along as quickly as you can. The sooner you get to the legally binding exchange of contracts, the better - you can’t be gazumped after this point.
Get the property taken off the market: Sellers aren’t always keen to do this, but if the property is no longer being advertised, then potential gazumpers are less likely to spot it.
Gazundering and gazumping are both potential pitfalls whether you’re buying or selling property, and it’s surprisingly common.
All you can do is be prepared and minimise the likelihood of this happening.
A financial expert or broker can help you understand everything you need to know when buying and selling a home.
Connect with a professional adviser through Unbiased today.