Gazundering can often be confused with the term gazumping as it is another way buyers and sellers can appear immoral when making decisions in property.
As a landlord trying to sell your property, the risk of being gazundered can be a real concern which would be in your best interest to avoid. In this article all your questions will be answered with what gazumping is, going over the many methods to avoid it as well as explaining if it is ever right to gazunder someone fairly.
What does gazundering mean?
Gazundering is where a buyer has a verbal agreement in place to buy a property but at the last minute when the buyer and seller are about to close the negotiation, the buyer ends up offering a lower offer in order to save money where they think the seller will accept a lower offer.
Contrary to popular belief, the process of gazundering is not actually illegal and happens a lot in property however there is a lot of debate as to whether it is fair or whether there should be more regulation on the topic.
The process of gazundering affects the seller of the property the most as they are left with the decision on whether to accept this lower offer and lose money in fear of no other offer from any other buyer being offered or simply because of the fact they need to move on quickly with the deal.
Why do buyers get away with gazundering?
Why wouldn’t a seller negotiate with the buyer and agree on a price they are happy with? In addition, why would they accept this changed offer rather than find a new buyer?
Most of the time, gazundering happens because sellers have a lot of anxiety around either moving a deal on quickly or having the fear of not getting another offer like the one they have at the moment.
Is gazundering legal?
If there is no legally binding agreement between the buyer and seller then gazundering is legal. However, there can be times when a buyer has signed for something and then backed out of it which would be classed as breaking the law.
Is gazundering ever fair?
Gazundering is associated with being unfair most of the time but the process actually can happen for a very legitimate reason. For example, if a buyer is about to buy a property but they discover there is a problem with a property that severely impacts its value then it is understandable that they lower their initial offer.
So, whether you consider gazundering fair or not is often dependent on what side of the deal you see it from. From a seller’s point of view, it is hard not to see things as unjust if you have been gazundered but from a buyer’s point of view, there may be a legitimate reason.
How to avoid gazundering?
Avoiding gazundering is a good way to stay ahead of negotiations and make sure you close a deal at the right price as a seller. Here are some examples of things you can do to keep the negotiation in your control and get the outcome you desire.
Avoid chain buyers
Chain buyers are buyers who are waiting for another deal to go through before they can finalise on a property deal. This is common whenever gazundering happens because if a buyer is waiting for a property that they own to finalise before they can confidently make an offer on a new one, The failure of that deal to go through impacts what they can buy.
For example, if the property completes at a price they are not expecting or the house they own doesn’t get sold at all it will force the buyer to offer a value for the new house at a discounted rate. If not, withdraw their offer, to begin with.
As a result, as a seller, make sure you do due diligence on the financial state of a buyer before you enter negotiations with them. Or, at least be aware of their situation so you can be prepared if they suddenly reduce their price at the last moment.
Make sure the buyer has their finances in place
If a buyer doesn’t have their finances in order such as a mortgage approved to buy a house, they are in a weak position to offer what the value of a house truly is.
For example, if a buyer knows they are approved for a mortgage for £100,000 and the house is also worth that money, they can confidently make an offer and know they can afford to pay for it by approving their mortgage offer and completing the deal.
Someone without this in place may end up making an offer only to find out their personal income or another factor such as poor credit score won’t allow them to get their mortgage offer approved in time, even if they thought so. Hence, they may get approval for another mortgage which is slightly lower and make an offer using this lower value instead.
Checking with the buyer or with the estate agents who show you offers that have been made to the property about the financial situation of the buyers who’ve made offers can help you avoid this.
Be honest with the condition of the property
One of the more legitimate reasons for a buyer to withdraw their offer on a property and replace it with a new one is because they find a fault or defect which they know reduces the initial perceived value of the house.
While, as a seller, it is always best to position the house you’re selling in the best light and make sure you show all of its best qualities, strictly avoiding the things that will reduce a properties value can be seen as pulling the wool over the buyers’ eyes in the hopes they don’t notice and will offer a price you know isn’t worth it based on the defects.
These defects can be as small as noticing there is a small amount of subsidence in the house, knowing there are parts of the property that need fixing or even knowing there are loud neighbours.
How you bring these issues up to the buyer can greatly impact their perception of the house. It is important to mention them but still make sure the property is overall seen in a positive light. But if the buyer feels like they have been lied to, this is where they can withdraw an offer and give you another one they know is below what you’re asking for.
Use auctions or cash buyers
Being able to sell a property quickly, reduces the likelihood that a buyer offers a lower price for the property. Especially if there is a deadline for the sale or there is a short window of time.
This is where cash buyers can be great. They can take the property off your hands as a seller in a matter of days or weeks if they already have the money in place. This is due to the buyer not having to sign up for a mortgage and go through the process of complying with the terms of a lender.
Better yet, in an auction, buyers have to do their research on a property before they even make an offer on the property in the first place so this helps the buyer weigh up what they would offer for it and make an offer with conviction.
In an auction and specifically traditional auctions, a deal can be completed even quicker. Buyer has to do their research, find the finances in order to make an offer and know what they would be willing to pay for the property all before they make their way to the auction house.
This sets things up nicely for a seller, you just have to set a guide price and a reserve price and then the rest is up to the bidders at the auction. When the auction is over the buyer has exchange contracts and the property would have changed hands typically within 28 days. Leaving no room for gazundering.
Build rapport and be empathetic
Understanding the buyer is a great advantage you can have as a seller. This is because you are able to use other factors outside of price to influence the buyer’s decision, making them less likely to gazunder you even if you know they think the property is worth less than it is.
For example, if you know you are selling to an older couple who don’t want to deal with the hassle of repairs for example. Placing significance on the fact that there have been electrical repairs recently done on the property so they won’t need to worry about that would work in making sure you are empathetic to the buyers’ needs.
In this way you can accentuate the good sides of a property and tailor it to a specific buyer, making sure the property becomes.
Having a good estate agent can help a lot with this as they’d be able to tell you about the needs of the buyer and help emphasise the benefits of the property to put things into perspective. Making sure any downsides of a property seem negligible in comparison.
Play your cards close to your chest
When you are selling a property, there can be buyers who will take advantage of the situation you’re in. For example, if you know that you need to sell a property soon to make a deposit on a new house the deadline is coming up soon, a buyer can pick up on this desperation.
If they know you’re desperate to sell your property they can make you a lower offer instead and gazunder you, knowing you’re likely to take the offer. Making sure a buyer doesn’t know the full extent of any vulnerabilities in the buyer chain you’re in as a seller can be extremely beneficial.
Things like being in a bad financial situation, having other investments or purchases lined up or disclosing that a property offer is more than you expected are all scenarios you wouldn’t want a buyer finding out.
Let buyers come to you
Often, the most interested buyers are those who make an offer first without having to be sought out by an estate agent and see the value of your property regardless of any work on your end other than listing a property for sale. buyers like this are much more likely to offer a price a seller is happy with and hence the deal is more likely to be complete.
On top of this, having buyers come to your shows your price is realistic and accurate. An accurate valuation for a house is less likely to get gazundered because the buyer knows they are getting a good deal.
Should you use gazundering yourself?
Whether or not as a buyer you should use gazundering is up for debate. However, there are instances where a seller has clearly lied and it is okay to reduce your offer.
Using gazundering after an underwhelming survey
If there is a shortcoming in the property description and it is clear the property, upon further inspection, isn’t as described to you by the seller, it would be wise to either withdraw your offer or reduce it, known as gazundering.
This often happens after there is a surveyor that comes to a property to conduct a valuation. If you get a first survey that is valued more than the first and you have good reason to believe the second survey is more credible this could be a good reason to withdraw your offer from the deal and gazunder. Especially if the seller has purposely withheld information.
Using gazundering if you have financial problems
Sometimes, things simply don’t go to plan. The mortgage offer you currently have could expire and leave you with an offer that you don’t have financial funding for. Additionally, an emergency could happen which would lead you to have to suddenly transfer money elsewhere.
You would never want to have financial problems but gazundering to save yourself from going into debt is a legitimate reason to do so. Despite it being seen as annoying from the sellers’ point of view.
What is ‘gazumping’?
Much like how gazundering is where a buyer upsets a seller with a lower offer. A seller can also accept a higher offer as opposed to a deal that was already in verbal agreement with a buyer. This is known as gazumping.
For example, if there is a property the buyer has made an offer for £100,000 for and the seller verbally agrees to take their offer. However, another buyer comes and offers £120,000, a higher offer and the seller takes it. The first buyer who offered £100,000 has now been gazumped.
How to deal with gazundering if it happens
Unfortunately, gazundering is part of negotiating in the property. It is best to go into negotiations confident you know the value of the property you are selling so you can not feel too bad if gazundering happens as you know you will get an offer you enjoy eventually.
If it does happen, learn from your mistakes like checking a buyer’s financial situation in detail and making sure they don’t seem too much like they’re in a rush. In general, people who are willing to wait for the property they truly want to purchase and are in no rush because they want to make the right decision are least likely to gazunder.
how to avoid being gazundered on low offers
Low offers are more likely to be gazundered. This is because if a buyer offers a low offer it is usually because they don’t have the money anyway or aren’t confident with their purchase. As a result, the quick acceptance of that offer makes a buyer feel like they have offered too much and it is a better deal for the seller.
To avoid this panic from the buyer, you could wait a while to actually accept an offer. Giving the perception that you have other offers lined up that are similar and you aren’t desperate to sell your property. This delay may give the buyer a greater sense of having found a good deal making them more likely to accept it and not gazunder you.
To conclude, gazundering is an interesting topic that is associated largely with property negotiations but really it can happen in any scenario.
Getting clued up on how to avoid gazundering is the best way to move forward and knowing how to get the real value you think your property is worth in the first place would be the better way to solve this problem in the long term.