Picture the scene: It’s been months of viewings, time-wasters, and offers that have fallen through due to mortgage issues or property chains breaking. But, finally, you’ve found a chain-free buyer with a promising mortgage agreement. They’ve put in a reasonable offer for your house, and you’ve accepted.
Then, at the last minute, just before the contracts are signed and exchanged, the buyer lowers their offer. This is known as gazundering, and it can be an extremely stressful situation for a seller to find themselves in.
The house buying and selling processes are rarely straightforward. So if you experience yet another obstacle, such as this one, it’s completely understandable if you feel like tearing your hair out at this point.
But what’s the right thing to do in this situation? Do you accept the lower offer? Can you take legal action? In this guide, we’ll explain everything you need to know about gazundering and give five tips on how to deal with it.
How do you respond to gazundering?
You can deal with gazundering in a variety of ways. Some of these include making a counteroffer, following the advice of your solicitor, contacting other interested buyers, taking out home abortive transaction insurance, and accepting the lower price.
However, you may be able to avoid gazundering in the first place by working with a good estate agent, listing your property at a reasonable price, being wary of offers that are over the asking price, selling to a chain-free buyer, establishing a sale date as soon as possible, making sure the buyer completes the survey quickly and being upfront about every aspect of the property.
Continue reading to find out more about dealing with gazundering.
Five tips to help you deal with gazundering
If you find yourself in the unfortunate position where a buyer has retracted their initial offer on your house and replaced it with a lower one, the first thing to do is try to find out why they’ve done this. Once you understand their reason for lowering their offer, you will have a better understanding of how to deal with the situation.
We’ve listed some of the best ways to respond to gazundering below.
1. Make a counteroffer
Even if you have no choice but to move forward with the sale, you don’t have to accept the buyer’s first gazundered price. Remember that they will have already spent a fair amount of money on surveys and legal bills, meaning it’s likely to be in their best interest for the sale to go ahead. So, use this to your advantage and make them a counteroffer.
Alternatively, if their new, lower offer is a result of an unfavourable survey, you can negotiate them up to a more acceptable price by agreeing to carry out any recommended repairs that were identified in the survey.
2. Consult your solicitor
An experienced conveyancing solicitor will have come across gazundering many times before, which means they should be able to advise you on how to handle the situation. They will also communicate with the buyer’s legal representative on your behalf to help you achieve the best possible outcome.
A good solicitor may even be able to prevent gazundering from happening in the first place, as they will be able to sense when a buyer is acting in bad faith and put a stop to the process before the sale progresses any further.
3. Come up with a backup plan
It’s a good idea to have a plan ‘b’ in place in case things go wrong. If you’ve been gazundered and you reject a buyer’s new, lower offer, you may find that they backtrack and agree to proceed at the original sale price. Otherwise, you will need to resort to a backup plan. This could mean speaking to your estate agent to find out whether there are any other interested parties who may wish to make a better offer.
4. Buy home abortive transaction insurance
While taking out residential abortive transaction insurance won’t remove the hassle of being gazundered, you’ll at least have the reassurance that your legal bills will be covered.
Most policies will cover solicitor or conveyancer fees, survey costs, and valuation fees if the sale of the property falls through.
5. Accept the lower offer
Considering the amount you’re likely to have spent on the conveyancing process so far, it may well be in your best interest to accept the new, lower offer. Doing so could also put you in a position to make extra demands, such as asking to exchange contracts by a certain date. Note, though, that unreasonable demands could result in losing the buyer altogether.
if your back really is against the wall, you may have no option but to accept the new, lower offer unconditionally. This is the least risky option. However, it will likely leave you in the least profitable position.
How to avoid gazundering in the first place
It’s impossible to have complete control over another person’s actions, so there’s always a chance you could get gazundered. However, there are some things you can do to minimise the likelihood of it happening:
- Be upfront about every aspect of the property — Otherwise, you may be giving buyers a reason to gazunder you later
- Be wary of offers over the asking price — Excessive offers are more likely to be dropped as the sale progresses
- Establish a sale date as soon as possible — The faster the sale moves along, the less chance a buyer will have to plan a gazundering offer
- List your property at a reasonable price — Not only will this give buyers less of an opportunity to reduce their offer, but you’re also more likely to receive multiple offers that you may be able to revisit in a gazundering situation
- Make sure the buyer completes the survey quickly — This will give you more time to iron out any issues that could cause second thoughts
- Sell to a chain-free buyer — This isn’t always possible, but buyers who aren’t in a property chain usually have their finances in place and are keen to move into the property on the agreed date
- Work with a trustworthy estate agent — Estate agents usually meet with both the buyer and seller, so they should be able to tell how serious a buyer is about their offer and what their circumstances are
Is gazundering legal?
Some buyers use gazundering to force sellers into accepting less than the agreed price of the property rather than starting the whole conveyancing process again from scratch. Because it can be a tactic used for personal gain, many people believe that gazundering should be illegal, but it isn’t. While gazundering can be viewed as unethical as it is unfair on the seller, neither party is legally bound to an offer until the contracts are signed and exchanged.
Some estate agents have policies that discourage gazundering, but they cannot stop buyers from doing it, as the law states they must inform the property owner about every offer they receive.
Are there any legitimate reasons for gazundering?
There are some situations where gazundering is completely justified (and, in the buyer’s case, unavoidable). Some of these include:
- Financial problems — A change in the buyer’s financial situation, such as an expired mortgage offer, a change in work circumstances or being gazundered themselves.
- Incompetency — If the buyer’s solicitor hasn’t undertaken the conveyancing process correctly, there may be costly issues they weren’t previously aware of. Therefore, they may be attempting to get a discount to cover these costs.
- Sudden market crashes — If the property market experiences a drastic change during the conveyancing process (which can happen when a transaction takes a long time), it can cause the buyer to get cold feet.
- Survey issues — Major issues may come up in the survey that the buyer would have to spend considerable amounts of money on fixing. Again, they may not have accounted for these costs and are adjusting their offer to account for the additional money.
There may be some other valid reasons for gazundering, but it is never ethical or fair for a buyer to string a seller along just because they want to bring the price down.
Is gazundering the same as gazumping?
Gazundering and gazumping may sound like similar things, but gazumping is pretty much the exact opposite of gazundering.
Gazumping is when a seller accepts a buyer’s offer and then breaks that promise by accepting a different offer from another buyer before the contracts are exchanged.
This means that with gazumping, the seller is in control of the situation, and it is the buyer who is left at a disadvantage.
Summary
Gazundering is when the buyer of a property puts in a lower offer than the price agreed upon just before the contracts are signed and exchanged. Unfortunately for the seller, it is perfectly legal. In fact, there are even some situations where gazundering is completely justified, such as a buyer’s mortgage lender retracting their offer, a property market crash, or previously unknown issues arising in the survey. If you’ve been gazundered, the first thing to do is try to find out the reason why the seller has done this. That way, you will have a better understanding of how to deal with the situation.
You can deal with gazundering in a variety of ways. Some of these include making a counteroffer, following the advice of your solicitor, contacting other potential buyers, taking out home abortive transaction insurance, and accepting the lower price. However, you may be able to minimise the likelihood of being gazundered in the first place by working with a good estate agent, listing your property at a reasonable price, being wary of offers that are over the asking price, selling to a chain-free buyer, establishing a sale date as soon as possible, making sure the buyer completes the survey quickly and being upfront about every aspect of the property from the start.
