Are we seeing the return of gazundering in the property market?
Many of us have been around the block a time or two and can remember the last time we had a shift in the property market. But, for the younger homeowners, you may not have known a time when things have felt a little shaky. As a result of this, there is a chance that you've never heard of the term Gazundering before.
Many of us have been around the block a time or two and can remember the last time we had a shift in the property market. But, for the younger homeowners, you may not have known a time when things have felt a little shaky. As a result of this, there is a chance that you've never heard of the term Gazundering before.
What does it mean? - Gazundering is the opposite of Gazumping, when a seller accepts one offer on a property but then goes back on this agreement and accepts a higher offer from another buyer, pushing the original buyer out of the sale and back into the market.
Gazundering is when the buyer reduces the amount of their accepted offer on a property, typically just before the exchange of contracts.
During a rising market, we see gazumping quite frequently, particularly when multiple offers for one property exist. Often a sign of desperation where offerors will increase their bid when they realise they were unsuccessful in the negotiation.
We don't see gazundering often when a market is very strong or rising. Mainly because if a buyer reduces their purchase offer at the last minute, the seller would be confident of being able to sell the property to someone else quickly and probably at the same price, if not more.
But, as the market begins to slow down and feel trickier, buyers may feel slightly nervous, feeling that the price they agreed to pay for a property back when they initially made an offer is now too high.
This would leave the seller in a tough position - do they accept a reduced offer and continue the sale at less? Or do they refuse?
You could accept the new lower price. If you accept the new lower price, your sale will complete within the timescale you're prepared for but at a lower price. Of course, you might be able to afford to proceed anyway with a lower price, so although it is frustrating, nothing will really change, and you will still move as planned, just with less money.
But what if you refuse to accept the reduced price?
Or, you could call their bluff? Your buyer might agree to continue the purchase as planned. But equally, they might decide that the property is no longer worth the agreed price, and they could withdraw from the transaction altogether.
If the buyer withdraws from the purchase, you are effectively back at square one with your home move. You will need to remarket to find a new buyer, pushing back your moving timescale. You will need to start the whole process again.
The reason that gazundering feels like such a negative process is that the seller is over a barrel. There is no easy way out of the situation.
If you have to remarket your property, specifically if the market has cooled, you could receive a much lower offer from a new buyer. This means you've sold for less money and had to delay your move and go through the process again. This is why some sellers feel that the best course of action is to cut their losses and begrudgingly accept the lower price from their current buyer.
Of course, if the sale falls apart, the buyer will also have to find somewhere else to buy, which could jeopardise the sale of their own property.
Gazundering is a dangerous game for buyers trying to get a few thousand pounds off the price.
Of course, it could genuinely be the case that the sale process has taken so long that the property market has corrected since the offer was made. If the chain of buyers and sellers were to work together, all parties could reassess the agreed price of the property. If everyone in the chain agrees, the sale prices could be universally altered.
It's a catch-22, which is why gazundering and gazumping are so negative. Because whichever way you look, someone will be in a worse position than before.
No one wants to be the bearer of bad news, but selling property is a rollercoaster, and this is just one of the circumstances that can throw things into disarray.
Perhaps a reality check about the property's actual value means the new reduced price is fair for your property in today's market? Or maybe the buyers' mortgage deal has increased in cost, and they simply can't afford to proceed at the agreed price. Your estate agent will be able to advise you as to the best course of action for you.
Either way, although it isn't a pleasant experience, there are ways to deal with it, and you and your house sale will be ok in the long run, with your agent in your corner to advise and negotiate on your behalf.
If you have any questions at all about gazundering and how best you should handle it, get in touch with our team of property experts today.