Gazundering is when a buyer who’s just about to close a deal on a home suddenly drops the price of their original offer. The seller is left in a predicament – accept the lower offer or risk losing the sale.
But is gazundering allowed? And if so, how can you avoid getting gazundered if you’re trying to sell your home?
Let’s get into it.
Gazundering vs gazumping
It’s estimated that 1 in 4 property sales fall through in the UK, a fair deal of which can be attributed to gazundering and gazumping.
The main difference between the two comes down to who gets affected. Gazundering puts sellers at risk, while gazumping puts buyers at risk.
Here’s a closer look:
- Gazundering. The buyer lowers their offer at the eleventh hour, pressurising the seller into selling for a lower price.
(If it helps, gazunder includes the word under — the buyer is coming in under what was initially agreed.)
In many cases, this is just buyers trying their luck to see if they can save some money – but it’s not always that. There are some justifiable reasons for why gazundering happens.
- Gazumping. The seller accepts an offer from a buyer, and then, before the deal is legally binding, they ditch their original buyer and go with a higher offer from another buyer. The original buyer is left in the lurch, often after spending a fair amount of money on home surveys, mortgage applications, and legal fees. (Here's more about gazumping.)
So gazumping? Gazundering? Is any of this legal?
Is gazundering legal?
Although it won’t score many brownie points for ethical behaviour, gazundering is, in fact, legal in the UK. Here’s why:
The sale of a home is not legal until something called an exchange of contracts takes place.
This is a vital part of the conveyancing process, when the buyer’s solicitor and the seller’s solicitor officially cement the deal, with identical signed contracts. The sale is only legally binding after this has happened, and the buyer has paid an exchange deposit.
The bottom line? Even if you’ve accepted an offer from a buyer, until those contracts are exchanged, the law is not going to hold either party to that agreement.
But that’s no reason to get shy – it's a reason to arm yourself with as much info as possible.
So let’s dive in. Who is most at risk of getting gazundered? And what can you do to protect yourself?
When are you most at risk?
There are a few different reasons you might find yourself gazundered, and not all of them are morally questionable.
In some cases, the buyer finds themselves in a strong position and uses that to their advantage, often unfairly. But in others, there are legitimate, above-board reasons gazundering happens.
Here are the main possibilities:
- You’re selling in a chain. That means you’re using the money you earn off the sale of one home to buy another. If you get gazundered and you’re in a chain, you may be in a situation where you have to take the lower offer in order to buy your new home.
- Your buyer got gazundered. In some cases, your buyer may be forced into a gazunder because they themselves have been gazundered, causing a whole chain of gazundering.
Here’s an example:
A is buying a home from B
B is using the money from the sale to A to buy a house from C
C is using the money from the sale of the house to B to buy a house from D.
And then a gazunder strikes.
A gazunders B.
B now doesn’t have enough money to buy their house from C, so they have to gazunder.
In turn, C will have to gazunder D because they’re out of pocket from the sale to B.
And there we have it: just one gazunder creates a domino effect through the whole chain.
- Something is found in the home survey that decreases the value of the home. In this case, gazundering may be fair play. Leaks, hazards, crumbling walls – if any structural surprises are flagged on the survey, your buyer may not be too keen to pay the price that you originally agreed on.
How can you avoid it?
Well, you can’t always, but here are some ways to decrease the risk:
- Pick a buyer who is not in a chain. This may not always be possible, but if you have the option, having a chain-free buyer might reduce the risks. Chain-free deals are usually quicker, easier, and less likely to fall through.
- Understand your own position within a chain. If you’re in a chain – which in many cases is the only way you can buy a new home – it’s best to get to know as much about that position as possible. If your buyer can’t buy at the price you agreed on, are you still in a position to go through with your own purchase? It can help to play the game of “What would happen if…?”
- Understand your home’s condition. The more you know about your property, the less likely you are to uncover nasty surprises about it when the buyer does their survey. Be as upfront with the buyer as possible about any potential problems and price your home accordingly. This is the time to remove all skeletons from all closets.
- Lockdown a date for the exchange of contracts. As soon as you’ve accepted an offer, head straight to setting a deadline to close the deal. Deciding on a date for the exchange of contracts structures the process and gives everyone something to work towards.
- Be on top of your game. The quicker the deal goes through, the less likely it will fall through. Respond to messages promptly. Get your admin in order as quickly as possible. Ask if you’re confused about anything.
What should you do if you get gazundered?
It all depends on your situation:
- If you’re in a chain or in a hurry to sell for whatever reason, you may have little choice but to consider yourself gazundered.
- If you’re in a position to reject their new offer, you can, of course, do this. (At this stage, you’re not legally bound either and are allowed to put your home back on the market.)
- If you discover something about your property in the survey that decreases the value of your property, offer to have that specific issue fixed rather than dropping the sale price. In many cases, this could work out in your favour.
If you’re selling and buying, Habito’s complete home-buying service can help. We’re with you every step of the way, from mortgage application to legal work and surveys. With expert advice throughout. Find out more here.