Gazundering becoming a common practice
Over recent years with the property boom in full swing in the UK many of us have come across the expression gazumping, as potential buyers battled it out to get their hands on a property, trying to outbid one another as the seller rubbed his or her hands together in glee. However, with the downturn of the property market and the bursting of the housing bubble has come the practice of gazundering, where would be buyers are dropping their offer price at the last minute leaving worries sellers in a real predicament.
Gazundering is the practice of dropping the offer price just before exchange of contracts, often when the seller has already committed to purchasing another property. In the current climate the seller has even less control, as walking away from the deal at this stage could mean waiting months for another buyer. For the buyer, however, the situation is different – he or she will easily find another property pretty quickly so it is often worth taking the gamble and if the seller pulls out then so be it.
Whilst this is an unethical practice it is by no means illegal, and many buyers have dropped the offer price just before exchange of contracts, claiming that recent house price falls means that their initial offer is no longer valid because it is way over the odds. Some buyers have dropped the offer price by 15 or 20%, which has wiped thousands off the price for the seller. However, for the seller it is a case of either accepting the lower offer or starting from scratch and waiting for another buyer, which could in itself prove costly.
Officials state that the most likely people to engage in this practice are high flying city workers who don’t really care if the seller pulls out. One official stated: ‘The most likely gazunderer will be an investment banker, in fact anyone in the City, particularly a single bloke looking to show off to his girlfriend or vice-versa. It’s reasonable to expect people to negotiate say £10,000 to £15,000 for issues such as damp but if the buyer is trying to get 10% to 15% off, then you’re into gazundering territory.’
One Chelsea based industry official added: ‘London is not like the country. If you fall for that perfect rectory then you are unlikely to want to jeopardise that. But in London if you are after a three-bedroom mansion flat and the deal falls through you know that, like London buses, there’ll be another one along soon. We had a double gazunder the other day in Westminster.
The price was agreed at £2.5m then it came down to £2.2m, which my client agreed to reluctantly, then the buyer dropped the price to £2.1m at which point my client withdrew.’
So, if you are planning to sell it is worth bearing in mind that the offer on your home may be dropped at the last minute, and therefore you need to brace yourself in case you end up with far less than you bargained for when it comes to the value of your home.
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[...] is also rising concern that many of those doing the gazundering are not really bothered if the seller decides not to go ahead with the sale at the new lower price, [...]