While most property purchases go ahead without a hitch, there has been a rise in the number of sellers being “gazundered” by opportunistic buyers.
The majority of homebuyers can expect it to take an average of eight to 12 weeks from an offer first being made on a property through to final completion, and a lot can change in that time – including the local property market.
In a strong market, some buyers can see themselves being “gazumped“, where an accepted offer is subsequently rejected by the seller in favour of another, higher offer. This can happen in both the rental market and when buying, and can leave the buyer in a very frustrating position, particularly if they have a chain of their own.
However, on the other side of the coin, a softening of the market can lead some buyers to take advantage of their strong position, in a process known as “gazundering”.
Markets like London are the most susceptible
Gazundering happens when an offer has already been accepted on a property and the sale is underway and ready to exchange, but the buyer then decides to lower their offer at the last minute. This can either lead to a complete breakdown of the transaction, or puts the seller in a tricky position where they are forced to accept the lower offer in order to keep the ball rolling.
It tends to happen more in markets that are slowing down, so right now it is a growing problem in London as house price growth continues to falter in certain key areas, and final selling prices are falling further below original asking prices.
Sometimes, gazundering might happen for other reasons, such as if a survey or search flags up last-minute issues with the property, or if something changes in the buyer’s circumstances which leaves them with no choice but to lower their offer. While in the first instance the seller can ask for proof of the issue and then potentially enter into a renegotiation, the second circumstance does not offer much comfort to the seller.
What problems it can cause
If you are selling your home to buy another property and have a mortgage secured based on the accepted offer amount, it can sometimes cause problems.
Brian Murphy, head of lending for Mortgage Advice Bureau, said: “Whilst most lenders are sympathetic in situations such as these, at the end of the day their underwriting criteria will still apply, and therefore it’s possible, depending on your individual circumstances, that you may not be able to borrow the extra you would need to make up the difference if you did decide to accept a lower offer on your property.
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“This can create a situation where you may need to, in turn, negotiate a reduction on the property you’re purchasing, causing a ‘knock on’ effect across the rest of your chain.”
There are a few things a seller can do to try and avoid being gazundered, such as set an exchange date for the contracts, push the buyer to have their survey done quickly, price the property realistically in the first place and make sure you keep in regular contact with your solicitor about the progress of the sale.
If there are any known issues with the property that could come up in the survey, it is better that the vendor is open about this from the outset, or takes steps to get the problem rectified before putting it on the market.