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The end of gazundering? - 13 October 2008

An estate agent in the south-east of England has taken steps aimed at cutting out one of the more unsavoury elements of the market downturn. Cluttons, the estate agent, has cut the time frame for the completion of sales through its offices in an attempt to stop the practice of ‘gazundering’.

Gazundering, when a buyer puts in an offer for a property which is accepted, but then demands the price is reduced just ahead of completion, has become much more prevalent since UK property prices began to stagnate some 12 months ago. A common sign in a market downturn, gazundering - like its opposite, gazumping – is not illegal, but is considered to be immoral by the majority of agents and the buying and selling public.

Cluttons are trying to stamp this practice out by halving the time it allows for transactions to be completed, from six weeks to just three. Under their new rules, Cluttons requires that a solicitor is instructed the same day an offer is accepted, then a survey must be carried out within seven days, mortgage approval within 14 days, with final exchange taking place within 21 days. The price of the accepted offer is non-negotiable, regardless of the surveyor’s report.

By taking these steps, Cluttons is effectively plugging the gap in UK house-buying legislation to arrest the rise of gazundering. The UK is one of the few places in the world where an accepted offer on a property is not regarded as legally-binding. Cluttons hopes to bring some degree of security to sellers who have taken knock after knock in present market conditions.

Gazundering buyers have been known to demand up to ten per cent reductions on the agreed price of a property just before completion is due, leaving sellers with the options of either accepting the reduced offer and potentially compromising their own financial situation, or risking putting their property back on the market in the most uncertain of conditions.

James Hyman, partner at Cluttons, said, “When the market was in the ascendancy, gazundering was practically non-existent. What we have done is a way of establishing whether a buyer is genuine.” The agent has reported a four-fold increase in gazundering since the property downturn began.

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