Negotiations are a tense part of house sales.
Both parties want to get the best deal possible, which leads some people to try ‘sneaky’ tactics.
Two of the most well-known tactics are gazumping and gazundering.
Let’s find out what they are.
What is gazumping?
Gazumping is when a house seller accepts a higher offer at the last minute.
This usually occurs when they already have a verbal agreement with someone else.
However, until the contracts are signed, they are free to go elsewhere. This enables them to accept the higher offer.
A homeowner may (reluctantly) accept a gazumping offer to maximise their profit.
An offer for several thousand more is very attractive. This person might ignore the ethics of breaking their promise to someone else to do this.
A potential buyer may gazump someone else because they are keen to complete the purchase. Perhaps another transaction has fallen through, and they are desperate.
What is gazundering?
Gazundering occurs when a potential buyer lowers their offer at the last minute, right before contracts are about to be exchanged.
The potential buyer hopes that the seller will still proceed with them. Finding another buyer might be too inconvenient.
It could also cost them a lot in conveyancing fees more to delay the sale.
Why do people gazunder?
Someone might gazunder for a legitimate reason. If a survey reveals significant issues with the house, then this is one explanation.
Another is if a bank disagrees with the house values and refuses to lend the full amount.
Some buyers use gazundering as a wilful tactic. They might knowingly not have been able to fulfil their original offer. In other words, they planned to gazunder all along.
This is used to ward off competitors and get a great deal. But it is largely considered immoral.
Risks of gazumping and gazundering
Risks of accepting gazumping offer
Accepting a gazumped offer is risky for the seller. You often don’t have time to confirm that the buyers are reliable.
They might have a faulty character. This is arguably more likely considering their preference for gazumping….
It’s also risky for the seller because the gazumped offer may not be legitimate.
The person may not intend to proceed with that amount. You could get gazundered at the last minute and end up with less than your previous buyer.
Risk to buyers involved in gazumping
Gazumping also carries risks for the person doing it. You must ensure you have the funds to proceed with this deal.
You may also not have the time to inspect the property thoroughly. Rushing the deal may cause you to miss major issues with the house.
Risks involved with gazundering
Gazundering is a risky strategy for the person doing it. The seller might walk away and reject your new offer.
This is especially likely if they have other buyers lined up. If you have already agreed to move out of your previous property, this could leave you homeless.
You also shoulder financial risk when you gazunder. If the seller walks away, you could miss out on an excellent property.
Any future deals might offer less value for money. You could also incur additional costs from a conveyancer.
In some cases, sellers have tried to act if they have been deliberately misled (and can prove it).
Walking away from a gazundered offer is equally risky. You might not have any other potential buyers.
This could change your plans and leave you stuck in your house with no takers. Even if you have other offers lined up, you cannot guarantee these will all be reliable.
Should I gazump or gazunder?
Most people frown on gazumping and gazundering. There are risks involved, which we have outlined above.
In some cases, you might have no choice but to gazunder. The seller may have hidden issues in the survey.
Breakdown in the housing chain or changes in your circumstances can also be a reason.
Sellers should sometimes avoid gazumping offers. If you have already built a good relationship with the previous buyer, sticking with them might be in your interest.
You could have proof of funding and good character. You cannot guarantee your gazumper will follow through on their promise.
Avoiding gazumping and gazundering
How to avoid gazumping
Speaking openly with the seller can help you avoid being gazumped as a buyer.
Agreeing on a price well below their asking figure is useless if they eventually turn elsewhere.
You should also demonstrate to the seller why they should stick with you. Respond to their communications quickly.
Move the deal along quickly. Get a solicitor and mortgage in principle sorted so you can move forward.
Some people ask the seller to take the property off the market. You could increase your price as compensation. If the alternative is being gazumped, you might consider this a fair ‘insurance policy’.
Consider an exclusivity agreement with the seller. Bring this up and ask if they’d be open to it. Your solicitor can draw up a contract between you and the seller that makes your verbal offer binding.
You could also get homebuyer’s insurance. Speak to an expert for more guidance on this.
How to avoid gazundering
You should be completely honest about issues with your house.
Last-minute survey problems are one of the main reasons they occur. Hiding a problem is often worse in the long run.
Where possible, get proof of funding from your potential buyer. This will reassure you that they can fulfil their offer.
Choosing a chain-free buyer makes gazundering less likely. This is because problems in a property chain will not create issues, and fewer things will go wrong.
You should also work with an experienced solicitor and estate agent. Ideally choose a buyer who does the same.
This means that mistakes are less likely to occur. Your sale thus has a greater chance of success.
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