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20th May 2008

Gazundering

What is gazundering (and what can you do to avoid it?)

Gazundering is the ethically shaky habit of a prospective buyer making an offer on a home which the seller accepts, and then reducing the offer shortly before completion of the sale. The buyer is counting on the seller being eager to sell and reluctant to have to market their home all over again. For example, the buyer presents an offer of £150,000 on a house which the owner agrees with, only for the buyer to then gazunder them by offering £120,000 just before final contracts are exchanged. In the current state of the market, it now seems that gazundering is on the rise.

There is not any acceptable justification for this reduced offer. It hasn't been made because a survey team found any new problem with the building. This is a somewhat devious tactic that the buyer is applying to save themselves some money through relying on the vendor's insecurities. Gazundering is likely to occur when the market is in difficulty, as it currently appears. With property values falling in many regions, building societies and the like are increasingly unable to obtain the funds to provide mortgages as we feel the effects of the credit crunch, and buyers are finding it tricky to obtain those funds and are keen to curb their spending, even if they obtain a good deal through ungallant means. If the seller rejects a gazunder offer, this can cause a chain of sales to collapse and return several parties to square one.

So, how do we avoid being gazundered? Have your property realistically valued and then set a genuine, acceptable price. If your home is over-valued, that might well be the excuse that buyer needs to gazunder. Their defence is that greedy homeowners that are fuelling an over-inflated property market deserve to receive less money than they anticipated, so don't give them the reason they need by offering your property at a price that reflects a true and fair value.

Consider making it a condition of the sale that buyers must pay a deposit and agree to a contract that ties them into completing the sale at the agreed amount, with a deposit placed in a solicitor's account and a deadline set for the final exchange of contracts. Paying a deposit is quite a normal practice abroad and the deposit is lost if the buyer aborts without a solid reason.

Finally, it never hurts to be on friendly terms with a buyer. If the buyer can see that the vendor is a person that would be hurt by such actions, their conscience might stop them from attempting to gazunder.

Even if a buyer attempts a gazunder, there is still hope. A vendor can refuse the gazunder offer, even on principle, and maybe the buyer will still complete the purchase at the original agreed price. The buyer has paid for a survey, perhaps built up an affection for the property and possibly done a deal with their current home. As a last resort, it might be possible to reopen talks and try to reach an accommodation instead of accepting the gazunder offer.