The rise of gazundering

There are so many things you have to contend with when buying or selling a home that it is hardly surprising the whole process is often cited as one of the most stressful periods of anyone's life.

Not only is there so much to organise to prepare a house for a sale or to work your way through the estate agent's particulars to find your next property, but also you can't guarantee that you have a buyer or seller until the contracts have been exchanged.

Perhaps because of this, underlined by the continuing precariousness of the general economy, there has been a rise reported in the phenomenon known as ‘gazundering'.

Most people are probably familiar with the term “gazumping”, which is where a seller accepts one offer on their property, but then rides roughshod over that verbal agreement to accept a higher offer from another buyer - understandably, they want to get as much money as they can from the transaction. 

This is to the benefit of the seller, of course, but creates stress to any buyer who has invested time and effort in the planned purchase, particularly if they are not prepared to increase their own offer to usurp the interloper.

“Gazundering” is a similar process but it favours the buyer: the seller has agreed an initial offer with a prospective buyer but, particularly when nearing the exchange of contracts milestone, that buyer then puts in a counter-offer that is lower, which the seller feels obliged to accept to avoid having to restart the whole process of finding another buyer.

Or there is another buyer who puts in a lower offer with a more favourable footing - for example, they are cash buyers or have no chain - which means there is a better guarantee of reaching the exchange of contracts stage more quickly.

Are gazumping and gazundering legal? The process is not illegal, but both are questionable practices and are not ethical in terms of reaching an agreement that is then overturned. While estate agents and conveyancing solicitors would advise against it, they are not required to prevent either practices.

Based on this, it should come as no surprise that online home buying portal Quick Move Now figures show that nearly a fifth of all property sales are impacted by gazundering. The company's figures show that 19% of property sales experience some renegotiation downwards of the price once the original offer has been agreed.

Quick Move Now also suggests that the principal drivers behind the activity are the increased cautiousness of buyers, and the precariousness of the current economic conditions - while there are buyers keeping the housing market generally buoyant, if they can procure a property for a lower price they will certainly try.

According to their analysis, which is broken down into the outcomes of gazundering, they fall into four groups:

Source: Quick Move Now

This indicates some good news for sellers, since over a quarter of attempts at gazundering are rejected and the sale completes as originally planned. However, it is more good news for the buyer, since over a half of those attempting the practice of gazundering successfully have their new and lower offer accepted.

Danny Luke, Quick Move Now's managing director, explains: 

“Gazundering is a growing concern for sellers, especially in the current market.

“There are several reasons why we're now seeing a higher likelihood of gazundering. 

“In the current climate, buyers are more cautious. 

“Higher interest rates and an end to lower Stamp Duty rates mean buying a property is more expensive. Buyers are therefore likely to intend to stay in their next property for longer. 

“Buying property feels like a bigger investment and buyers are wary of making a costly mistake. We also need to consider the rising cost of building materials. 

“People are less likely to be looking for a ‘doer-upper' in the current market due to rising costs. 

“If a property survey uncovers unexpected work needed, buyers are more likely to ask for a price reduction to cover the cost. 

“Sellers may be shocked or disappointed to experience gazundering, but the reality is that under our current buying and selling process the buyer has very little information about a property's condition at the point of making an offer. 

“Few buyers will have enough knowledge about property to have a robust idea of any work that might need doing simply from a property viewing. 

“They therefore rely on the expertise of surveyors to make them aware of any issues and the cost implications. 

“If the survey highlights unexpected issues - which is the most common time for gazundering to occur - the buyer is likely to want or need to deduct at least some of that cost from the property purchase price. 

“Under the current system, there is little that can be done to protect yourself from gazundering, other than making sure your property is well-maintained, and any potential issues are addressed before putting your property on the market. 

“The rate of gazundering does, however, add fuel to the argument of moving closer towards the Scottish system and providing more information, including a property survey, at the point of marketing the property. 

“It would then be easier to make offers legally binding earlier in the buying and selling process.”

If you are buying or selling your home, you'll want to ensure that your outlay for the legal side of the process is protected, even if the transaction falls through just before completion.

To this end, look no further than Homeward Legal.

Our conveyancers will start work on your plans as soon as you agree to the quotation and appoint them to represent you. 

Homeward Legal will also provide a quote that will not change - what you are quoted is what you pay for standard conveyancing process, which means you can effectively budget for your conveyancing needs.

There are some unforeseen items that might arise during the purchase and/or sale, which includes a specialist flood assessment report, but the solicitor discusses these and their cost as they come up. 

In addition, to protect the homebuyer further, Homeward Legal operates a ‘no completion, no fee' promise, which ensures that, should the purchase or sale not go through as planned to completion status, no payment is required.

Call  to get your conveyancing quote started, or to discuss your concerns with your plans to move.

Or you can get a quick quote, using Homeward Legal's easy-to-use quote generator.