/ Home & Energy, Money

Time to put a stop to gazundering

Colourful houses on piles of money

Reports say that more and more house buyers are undercutting asking prices at the last minute – or ‘gazundering’. It’s a practice that needs to end as it’s unethical – or is it?

Imagine if you were selling a cake at a fair. A buyer turns up, has a look, likes the icing and seems happy to pay the £2 you’re asking.

As you wrap it up, she hands you just £1. You complain, but she says it’s 4pm, the church hall is clearing out and £1 is the best you’ll get. Reluctantly, you accept.

That just wouldn’t happen, you cry. Unfortunately, that’s exactly what’s happening with the housing market. And it even has a name – gazundering.

Gazundering and the law

Recent reports show that up to 25% of purchasers are attempting to renegotiate the house price downwards just before contracts are exchanged. It’s the opposite of gazumping, which we heard so much about during the property boom.

Gazundering is not illegal in England or Wales because nothing is binding until contracts are exchanged. However, it puts sellers in a hugely difficult position – accept the sale on your buyer’s terms or hold out for an asking price that may never come again. Especially in a falling market.

In Scotland, however, gazundering can’t happen as the initial offer on the property is legally binding. And there have been calls for the system to be introduced in the rest of the UK.

Don’t be gazundered

The best way to avoid gazundering is to set a fair price in the first place and to try and get contracts exchanged as swiftly as possible. And in the end, if you’re not happy with the price you’ve been offered, you can always back out – putting the onus back on the buyers.

However, there are those who believe that gazundering is both human nature (looking for the best deal) and economically sound. After all, in the period between initial agreement and exchange, the property value may well have fallen, so why pay the original price?

In the end, your feelings on the subject may depend on whether you’re a property buyer or a seller at the moment. But the question still remains, you wouldn’t do it with a cake, so why do it with a house?

pickle says:
29 October 2010

Under gazumping should be made illegal – agreeing a price for a sale needs to be a firm comitment. Presumably this will involve a modification to the legal process, but it will be worthwhile and will stop this unfair practice.

This happens to us two years ago and I definitely agree that it should be outlawed as it is in Scotland. Unfortunately we were desperate to leave the area in which we lived at the time and it was at the start of the financial meltdown, so as it was it had taken many months to even have someone offer so we were sitting ducks and it was not pleasant.

It happened to us in 1999. If we had accepted the first offer we had for the house from a different buyer we would have been better off. But we held out for a higher offer and we got it only for the buyer to gazunder at the last possible moment – rat!!! We had a lovely large house but in a bad location so we gritted our teeth and went ahead.

Oh for the Scottish system!

Gazundering does not always occur without reason. The time it takes to exchange contracts may mean prices have decreased and/or the survey or legal checks may present issues which may result in a cost to the new purchaser they wouldn’t have initally expected and so a price re-adjustment is warranted. It may not seem entirely moral given everyone’s assumption seems to be that the seller has no option but people are within their right to say no if they do not believe the reason is valid!

Val Taylor says:
30 March 2012

We have just been ‘gazundered’ which neither of us had any idea about. We already had down valued our home to enable us to get a quick sale. The contract came through with the agreed price, then I received a telephone call dropping the price by £10,000. As we have already commited to another property we have little choice but to accept what has happened. We are both severely disabled pensioners and this has hit us very hard.

Karen says:
1 June 2012

I am about to be gazundered I think. It’s the worst feeling in this whole stressful house buying/purchasing game! I feel like my head is on the block waiting for the axe to fall. I’m praying for an 11th hour reprieve! It’s a landlord buying my house…. Or not. I was brought up not to give in to s bully but what do I do???

The problem is that gazundering can happen regardless of how fair the agreed price is. There is nothing stopping the buyer from doing it, no matter how fair the agreed price is. If the buy had a survey and found a structural problem that is going to cost £10K to fix then that is reasonable cause. But doing just because they can and because the seller is already committed and can’t back out is not. It is taking advantage. Read: http://www.firsthomebuyer.co.uk/th-master.php?file=gazunder.xml be sure to follow the next page link at the bottom!

blarg says:
20 January 2013

To play devils advocate it is a bit hippercritical for people who approved gazumping during the good years to now want gazundeirng abolished in the bad. The fairest solution is to bring in a ban after house prices have reached the bottom of the trough and have a new system abolishing both gazumping and gazundering.

Good suggestions, Blarg, but unfortunately they don’t ring a bell when the market hits the bottom of the trough. It’s more like a trampoline and with a bit more pressure from above it will yield a little more. Prices in London and certain favoured areas are still in the ascendant but not so strong that gazumping has returned and obviously, in a rising market, there is generally no risk of gazundering. But these conditions do not prevail across the board. If the period from “acceptance of offer” to “exchange of contracts” can be kept as short as possible then the scope for gazundering is reduced, but this depends upon a much more fluid market than the current one where lining up a sequence of house sales and purchases is a nightmare and can take ages. One hiccup and the whole thing can disintegrate. Best advice at the moment seems to be “Sell first and then see what you can buy” but this does not work in every situation and there is no mechanism for ensuring that all buyers and sellers are working to the same model. The lack of capacity to buy new houses is the major stumbling block in the housing market at present. Lubricate that process and the whole market will start to roll.

Gazumping and Gazundering is the name of the game. Fair Game it is. So it is ok if you are selling a house at 100k and some one jumps in a says its worth more like £110k, you sure will revisit the buyer to give them an opportunity to up their offer. Same thing but on the buyers side. Tough.