The Property Market and Gazundering: What it is and How to Avoid It By Susy Copus At Isnare.com Ezine Articles

With property prices falling gazundering is becoming more common. What is it and how can you avoid it?

With property prices falling and still expected to fall further, sellers are desperate to secure a sale on their property before their property loses more value. They want to sell their property fast and it doesn’t take a canny buyer to know this.

So whilst just last year the art of gazumping was common pace – that is when a sale has been agreed but then the seller breaks the agreement and takes a higher bid from another seller, now gazundering is becoming more common. In Scotland, they have tackled the problem of both gazumping and gazundering by making the agreement legally binding once an offer is accepted. Unsurprisingly, estate agents are keen to bring the law to the rest of the UK but there are no plans for this at the moment.

How common is it?

According to the Yorkshire Bank one in three buyers would consider gazundering. The estate agents, Cluttons, have said recently that gazundering takes place in around 30% of property transactions.

What exactly is it? Imagine your property is on the market and you have a buyer. Fantastic. Sure, you’ve taken an offer but you’re happy you have a buyer. The legal work is done, the survey work is done, you’re ready to exchange and get that signature, when the buyer suddenly claims that they’re not going to go ahead with the purchase unless you drop the agreed price by, let’s say, £15,000. Or significantly more. You’ve been gazundered.

So what do you say? By not accepting the lowered price you’ve lost your legal fees, any costs associated with the purchase of another property, very likely your next property, your all-important buyer and you have to start the whole process again from scratch and all in the time whilst property prices are expected to fall further.

Some buyers may even make offers on two properties and only go ahead with the one that has come down the most. This is entirely legal of course, even good business practice for the buyer, but frustrating, and some say, immoral. Gazunderers are most likely to be developers or landlords who do not have any emotional attachment to the property – they are more likely to want to bag a bargain. Also, gazundering usually takes place on a Friday – the low offer is made, and the seller wants the deal clinched before the weekend – so is more likely to accept the offer.

How can you avoid it?

There are a number of ways to attempt to avoid it.

Firstly, on the outset when you put your property on the market, set your price to be realistic in the current market. If you overprice it you are more like to be gazundered. Secondly, the seller can insist on non-refundable deposit of 2-5% on the outset of agreeing a price. Thirdly, a legally binding contract can be signed agreeing that the property will be bought for the agreed price, subject to the survey, and a date set for exchange of contract. In a falling market you want the exchange to be as quick as possible – before the market falls further. Finally, keep your property on the market until contracts have been exchanged so that you are maximising your chances of having another buyer in the wings.

Remember, if your buyer wants to gazunder, you do not have to take the lower price. You can accept, or renegotiate or simply refuse and start over. It’s not ideal, but it is a choice.

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