In the world of property, there are plenty of terms and practices that can leave both buyers and sellers scratching their heads, for example gazundering. This is a practice that has been increasingly discussed in property circles. So, what is it, and how can you avoid it?
What is gazundering?
Gazundering refers to a buyer lowering their offer on a property just before the sale is due to complete. Typically, this occurs during the final stages of the transaction, often at the point of exchange of contracts, when both parties expect the deal to go through. It’s essentially the reverse of gazumping, where a seller accepts a higher offer after agreeing to a lower one.
This tactic can leave sellers in a difficult position. They may have already made plans, perhaps purchased another property or committed to moving, and a last-minute reduction in price can put their whole chain at risk. The buyer, however, may feel justified in lowering their offer due to market conditions, survey results, or other factors that have emerged since their original bid was accepted.
Why do people gazunder?
There are several reasons why a buyer might resort to gazundering. The most common include:
- Market conditions: if there is a sudden drop in market value or a downturn, buyers may feel their original offer is no longer justified.
- Survey findings: if a property survey reveals issues such as structural problems, outdated systems, or other major concerns, the buyer might feel the property is not worth the agreed-upon price.
- Financial pressure: sometimes, buyers may encounter unforeseen financial issues or changes to their mortgage offer. Gazundering is an attempt to renegotiate the price to ensure the deal remains affordable.
- Tactical negotiation: in some cases, buyers may see gazundering as a bargaining tool to push the price down, hoping the seller will accept the reduction to avoid further complications in the sale.
How to avoid gazundering
For both buyers and sellers, gazundering can create unnecessary stress and complications. Here are some strategies that can help to avoid this practice or deal with it effectively.
For sellers:
- Pre-sale survey: consider commissioning your own survey before putting your property on the market. This can help identify potential issues that could give a buyer leverage to gazunder later on. By addressing these issues upfront, you may avoid last-minute price reductions.
- Set clear expectations: ensure that your sale price is based on realistic market conditions. Sellers who price their homes too high may invite offers that are too good to be true, leading to the potential for gazundering if issues arise. A fair price from the outset reduces the likelihood of buyers looking for discounts at the last minute.
- Pre-emptive communication: if you feel the buyer may try to gazunder, keep communication lines open. Be clear about your intentions, timeline, and the potential consequences of reducing the price, such as risking losing the deal. This transparency can sometimes deter buyers from trying to take advantage of the situation.
- Stick your ground: in some cases, buyers may attempt gazundering because they believe you’re in a position where you’ll have no choice but to accept a reduced offer. If you’re not under pressure to sell quickly, be firm in sticking to your price. Let them know you are willing to walk away rather than accept an unreasonable reduction.
- Get a lock-in agreement: some sellers may consider negotiating a more formal lock-in agreement with the buyer, which can help to deter gazundering. While these are not always legally binding, they can add a layer of commitment for the buyer.
For buyers:
- Be transparent and fair: if you are thinking of lowering your offer due to new information, such as survey results or market conditions, communicate openly with the seller. Instead of a last-minute drop in price, explain the issues and ask if a renegotiation is possible.
- Understand the risks: gazundering can damage your reputation as a buyer, and in some cases, it could cost you the property entirely. Sellers might choose to pull out of the sale and look for other buyers, potentially losing time, money, and the property you want.
- Do your due diligence early: avoid the temptation to gazunder by carrying out thorough research and surveys early in the process. Getting a detailed survey and fully understanding the property’s condition from the outset will help you make an informed offer without feeling the need to renegotiate later.
- Negotiate early: if issues arise that may lead you to reconsider the price, bring them up early on in the negotiation process. Waiting until the last moment to ask for a reduction can lead to a failed deal.
Gazundering is an unfortunate practice that can lead to stress, frustration, and wasted time for both buyers and sellers. The best approach is to maintain open communication and transparency throughout the process. By setting realistic expectations, doing your due diligence, and staying firm when necessary, you can help prevent gazundering and ensure a smoother, more successful transaction.
If you’re ready to embark on your property journey, whether buying or selling, it’s important to stay informed and prepared. Understanding the risks and taking steps to mitigate them can help you navigate the complexities of the property market with confidence.
