You’ve found a buyer for your property, and they seem keen, maybe they’ve even offered the asking price. Everything is going to plan to sell your house, and then, just as you’re about to exchange contracts, they tell you they want to lower their offer.
What do you do now? Accept the lower offer, possibly leaving you stretched financially. Or refuse and risk them pulling out of the sale – jeopardising your house purchase. It’s a tricky call. This is a practice called gazundering. When it comes to gazundering, forewarned is definitely forearmed – we look at the problem and seven things you can do to help avoid gazundering during your sale.
If you are selling a property in London areas such as Harold Hill, Newbury Park or Collier Row, read on for some tips on avoiding the scenario of gazundering.
The term gazundering refers to the situation in a property sale where a potential buyer has already put in an offer and then decides to lower their offer before the contracts are exchanged.
The lower offer could be a few hundred pounds or thousands of pounds less, leaving the seller with a difficult decision. If the seller accepts the lower offer, they will lose money, but if they don’t accept, the sale could fall through and prevent them from purchasing a new property.
Buying and selling at the same time?
Here are 10 things that could go wrong, and often do go wrong, and what, if anything, you can do to avoid them.
Buying and selling at the same time?
Here are 10 things that could go wrong, and often do go wrong, and what, if anything, you can do to avoid them.
Everyone’s heard of gazumping – when your seller accepts your offer, then goes on to accept a higher offer. Gazundering is a bit like gazumping in reverse.
Instead of the scenario where the seller accepts a higher offer, it’s where a buyer lowers their offer at the last minute, just before contracts are exchanged, risking the whole property chain falling through.
It’s a question we’re often asked – is gazundering legal? While unfair and unethical, gazundering isn’t illegal in England. Often, it’s down to your buyer chancing it, but there are some exceptions where there is a valid reason why a buyer lowers their offer.
You might be wondering – how common is gazundering? While it is not a very common problem, it does tend to happen more often when the property market is slow, and gazundering after a survey can be common in properties with issues.
Sometimes the reason for gazundering is that that buyer is trying their luck and hoping to save money at the seller’s expense. However, there are other reasons a buyer decides to reduce their offer. Possible reasons for lowering their offer include:
If the buyer finds out something about your home that comes up in the property survey that reduces its value, this can be a valid reason for the buyer reducing their original offer. This is especially true if major issues are unearthed which would otherwise make the buyer think twice about purchasing the property at all.
Gazundering is also common in a volatile housing market, where prices begin to fall between offer and exchange. The buyer might feel that should only pay the latest market value, especially if there has been a trend of significant change.
Another reason people gazunder sellers might be that the potential buyer does not have a big enough mortgage offer to cover the total sale price, and they reduce the offer to the amount their mortgage is approved for.
When the lender appoints a mortgage surveyor to value the property, the surveyor may value the property at less than the offer. In this case, the lender will usually not be prepared to provide the mortgage unless the price is reduced.
If there is an issue with the property chain that results in increased costs for the buyer, they may try to reduce the price to cover the additional costs. For example, the buyer of their property might gazunder them, leaving them short of the amount needed to pay the offered price for your property.
Unfortunately, some people simply change their mind about buying a property. They might have seen another property come onto the market that they think is better value. This could spur them to try and reduce the price for your property, as they feel they’ve not got much to lose.
When a buyer is searching for a property and looking at the price range that they believe they can afford, they may not have taken all the associated costs into account. Maybe they didn’t realise how much they would need to pay in conveyancing fees or another cost. They now try to reduce the price due to their miscalculations.
If solicitors are moving too slowly and the buyer is keen to move quickly, they could still be looking at other properties. If they find a property that the deem to be better value, they could try to negotiate a lower price due to the inconvenience of the delays.
They may need to move into rented accommodation while they wait for the property to complete at an extra cost to them.
You can’t stop a buyer from changing their offer before contracts are exchanged, but you can do everything in your power to avoid this situation happening in the first place by understanding some of the ways you can avoid gazundering and by learning how to deal with gazundering.
It’s not always easy to know who will turn out to be a gazunderer. But with advice from your estate agent, you can go for the best possible buyer available to you. First, make sure they are in a position to buy by having a mortgage agreement in principle.
Opting for a chain-free buyer, if you’re lucky enough to choose, could help. Things will move more quickly and without a place to sell, they aren’t reliant on a sale of their own. Finding a chain-free property yourself can also reduce the pressure.
Keep in touch with your conveyancer and estate agent to ensure things are progressing at the right pace. Delays in the system could lead to a buyer having second thoughts, which increases the risk of the buyer pulling out or trying to reduce the price.
Regular dialogue with the buyer can also help you both build a relationship with open lines of communication – meaning less chance of issues. Once you’ve exchanged contracts, your buyer can’t negotiate on price, so focus on getting a date in the diary!
Be careful about over-pricing your property or accepting an offer far above the asking price. Your buyer may struggle to get a mortgage and need to lower their offer. Or they may have offered too much to bag the property in the first place, intending to gazunder you later. Choosing an experienced estate agent and keeping in line with the local market will help ensure your property price is right.
A good agent with plenty of experience will be a huge asset if your buyer starts pushing their luck, so pick wisely. When you appoint your agent, ask plenty of questions, including how they deal with gazundering.
Avoid choosing the agent who prices your home most highly, as this could be a recipe for disaster. They could be more concerned with achieving a higher fee than making sure your sale goes through smoothly.
Be upfront about any issues with the property, which are likely to come out in the survey or pre-purchase conveyancing that may result in the buyer trying to gazunder.
For example, don’t try to hide damp issues or if your property is in an area that is a flood risk. It’s better to agree on a realistic offer in the first place than have to give discounts after the survey, or worse, at a very late stage.
If an issue is flagged in the survey, you could offer to pay for the issue to be rectified. For example, you could pay for damp proofing if damp has been revealed in the survey. This could be more cost-effective than accepting a lower price and the buyer will be happy that the issue is resolved before they move in.
When your home goes on the market, calculate how much you can afford to accept for the place and how much will leave you stretched. If the new offer is within your acceptable margins – and your buyer won’t budge – it may be best to grudgingly accept. You should consider how much interest there has been in your property and how quickly you want to move.
Agree on a date to exchange contracts, that way everybody knows what date they are working towards. Even though the sale is still not legally binding, having a date will make all parties feel more committed to getting everything done by the agreed date.
If the buyer is having second thoughts, they may express any concerns at this stage rather than waiting until the last minute.
Though rare, you could ask your buyer to sign a contract agreeing to the terms of the sale, subject to issues with the survey. You could also ask them to pay a percentage of the deposit at this stage. Ask your solicitor for advice.
Before you respond to an attempt to gazunder you, consider the reasons they provide. If the price is unrealistic, then you are unlikely to achieve the amount if you put the property back on the market. If it is related to another issue that will probably cause the same issue with another buyer, you might be better accepting the lower offer.
However, if you think they are trying their luck or the issue is on their side, for example they have miscalculated or haven’t been able to obtain the required mortgage amount, that shouldn’t be at financial detriment to you.
If you are in a strong position, for example, during a sellers’ market, it may be better to refute the lower offer. However, if you’re trying to sell during a cool housing market and you are keen to sell quickly, you may prefer to accept the lower offer or negotiate halfway.
If you’re considering selling a property in East London, we have plenty of experience in the local market including Hackney, Rainham and Upminster. We can help you set the right pricing strategy for your property, advise you along the way as you receive offers, and work towards a completion date. Give us a call to find out more.
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