To gazump or to gazunder, that is the question. It is a tale as old as time. When it comes to selling or buying a house, words like gazumping and gazundering have been around as long as the house selling process itself.
If you are in the process of buying or selling a house and you are not familiar with the terms gazumping or gazundering, then there is no time like the present to become better acquainted with them as chances are you may come across them sooner than you think.
But what exactly is gazumping and gazundering? What do they mean, and what does it spell for your house hunting journey? Read on to find out more.
Looking for a quick answer? Check out our drop-down menu below!
- What Is Gazumping And Gazundering?
- Why Are People Gazundered?
- How To Avoid Gazumping
- How To Avoid Gazundering
- How To Gazump
- How To Gazunder
- Should I Try Gazumping And Gazundering?
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What Is Gazumping and Gazundering?
Gazumping and gazundering are popular terms that are used a lot in the world of house sales. But what exactly do they mean?
Gazumping is a term that is used to describe when someone makes an offer on a property and has the offer accepted by the seller only for someone else to then make a higher bid for the same property and successfully acquire the property over the original buyer.
Gazundering is when a buyer unexpectedly lowers their offer right before contracts are due to be exchanged.
Where gazumping is a problem for buyers, gazundering is a problem for sellers.
Are Gazumping And Gazundering Illegal?
Unfortunately, gazumping and gazundering are both legal in the UK. Until the contracts have been exchanged and the contract becomes legally binding there is nothing you can do from a legal standpoint.
Why Are People Gazundered?
Whilst there is usually only one reason why someone may gazump another person, there can be many reasons why someone may gazunder a seller. Where a gazumper wants the house no matter the cost, a gazunderer may have any number of reasons as to why they may do it.
- Survey Results – A survey may uncover results that show a defect within the property that may cost the buyer thousands of additional pounds to correct.
- Miscalculation – Often buyers get too excited at the start of the house buying process and overestimate the amount of money they have to spend and make an offer they cannot afford. As time goes on, recalculations are done and the error is found which may result in you receiving a lower offer than originally expected.
- Chain Problems – Often house purchases are made up of a chain, with the sale of the next house dependent on the sale of the house before it in order be completed. In short, your buyer will also more than likely be a seller making them just as susceptible to gazundering as you. If they are gazundered, they may be left with no choice other than to gazunder you as well.
- Change Of Heart – Gazumping is a threat that looms over many buyers’ heads, meaning that many of them may continue to search the market, even after their offer has been accepted. The danger in this lies in them finding a property that they deem to be better value which could lead to them offering less money than agreed.
- Slow Progression – Speed of sale plays a big role in how likely you are to be gazundered. A slow sale can have a negative impact on both parties within the sale. Should there be delays, there is the risk of your buyer’s mortgage offer expiring. Should this happen and they reapply and are offered less money, there’s no guarantee they’ll get the same deal that they did before.
How To Avoid Gazumping
Gazumping and gazundering are two issues something that every homeowner dreads cropping up. Gazumping is something that no homeowner wants to have to deal with. Unfortunately, there is no way to be 100% protected against a potential gazumping, however, there are ways to prepare yourself and reduce the risk.
- Be Prepared – Before you start preparing to make any offers you need to ensure that you are as informed as possible. To do this you should have a mortgage in principle in place with your lender as well as having a solicitor ready armed with all of the documentation you will need for the sale. The risk of the seller getting fed up and finding another buyer increases significantly the longer that you keep them waiting.
- Act Quickly – When it comes to avoiding gazumping, speed is your best friend. The quicker that you can get your contract signed and exchanged, then the sooner you will be home and safe. It is important to regularly check in with your solicitor, conveyancer, and mortgage broker (if you have one) to ensure that the sale is progressing at a suitable rate.
- Ensure The Property Is Off The Market – As long as the property is still on the market, there is always the chance of it being spotted and stolen by another eager buyer. One of the ways you can avoid this is by making it a condition of the sale that the sellers take the property off the market. By doing this you can reduce the risk of someone else swooping in at the last minute and stealing the sale from underneath your nose.
- Be Wary Of Your Choice Of Seller – Another way that you can reduce your risk of being gazumped is by forming a positive relationship with the seller. A seller who is genuinely pleased with your decision to purchase their home is much less likely to accept a higher offer. Any seller who seems unusually pushy or overeager to get the sale over and done with should be considered at risk of gazumping.
- Don’t Be Afraid To Ask For It In Writing – Should the worst-case scenario happen and the estate agents calls and claims to have received or accepted a higher offer, then don’t be afraid to ask for proof of the higher offer in writing.
- Stay Calm – One of the most important things to remember is to stay calm and avoid panicking. If you should become a victim of gazumping, do not immediately jump in with a high counter offer. You should instead take your time and consider things carefully before you get into a bidding war. You should always listen to your gut and if you feel that you are being treated unfairly or that you will be paying more than the value of the house then you need to be prepared to let the property go.
- Convince The Seller To Agree To A Lock-Out Agreement – A lock-out agreement is a legal agreement. It serves as a formal agreement between the buyer and the seller that states that the seller will not market or sell the property to any other buyers. If the seller is in breach of this agreement, then the buyer can recover ‘wasted’ costs. However, it is worth bearing in mind that this agreement does not give you the right to force the seller to sell the property to only you.
- Consider Taking Out Home Buyer Protection Insurance – Home buyer protection insurance is specialist insurance that protects against the loss of upfront expenditures in the event that the purchase falls through. As a rule of thumb, you should always check the policy wording, but this kind of insurance will usually cover things such as legal costs, survey fees, and mortgage lending expenses.
How To Avoid Gazundering
Sadly, when it comes to gazumping and gazundering, there is no entirely foolproof way of protecting yourself against gazundering, however, there are steps you can take that may help to prevent it from happening to you.
- Value Your Home Realistically – The best way for you to avoid being gazundered is to set a reasonable price from the beginning. By doing this you are setting yourself up for success in several ways. Setting a realistic price will allow your property to attract a greater number of would-be buyers and will give you the opportunity to choose the buyer you decide to sell to. Not only this but you will also leave buyers very little room for bargaining at a later date.
- Don’t Try And Hide Any Problems – As the old saying goes, honesty is the best policy. This is certainly the case for selling your home as it is common for sellers to try and hide an issue and hope the buyer does not notice until it is too late. However, any problems that you try and hide will more than likely come out in the buyer’s survey. Being upfront and honest about any problems your property may have will save you from the embarrassment of the problem being discovered and will also reduce the chances of your buyer trying to gazunder you at the last minute.
- If Any Issues Are Found, Offer To Fix Them – If you have been honest with potential buyers about any problems that your property may have and there are still issues uncovered in the buyer’s survey, then you may be better off offering to pay for the repairs to be done yourself rather than accepting a lower offer from your buyers.
- Work Only With Reputable Professionals – The main cause of gazundering is usually delays within the sale. One of the easiest ways to avoid delays is to complete the sale through an estate agent. Trying to cut corners and save money by not using estate agents and solicitors can come back to haunt your further down the line as delays may end up costing you your sale altogether.
How To Gazump
If you are considering gazumping, it is not a decision that you should take lightly. In doing so you are taking away someone else’s dream home and may be collapsing other people’s property chain. However, if you are sure that you absolutely have to have the house there are steps you can take to gazump.
Develop A Relationship With The Agent
In order for the gazumping to be a success, it is important to have a good relationship with the estate agent selling the home. Explain your situation to the agent, tell them exactly why you love the property so much and what your plans are for it, and other details. By really selling the agent on why you should have the home will make them more sympathetic to you and therefore more likely to put your gazumping offer forward to the seller in the best possible light.
Find Out Where The Buyer Stands
Try and find out what the position of the buyer is. An estate agent can’t tell you every aspect of the buyer’s lives and won’t be able to tell you the exact offer accepted but they can give you an overview. This overview will help you to stand out against them and make you more attractive to the seller.
Find Out Where The Seller Stands
As well as knowing the buyer’s position, it is important to understand where the seller stands as well. Are they in need of a quick sale? Are they involved in a chain? Have they already found the home they are looking for?
By better understanding the seller, you can use their situation to your advantage and convince them that you are the more beneficial person to sell to.
Find Out When The Offer Was Accepted
In order to successfully gazump, it is key to know exactly how far along in the sales process the buyer and seller are. A property where the searches and surveys have all been completed and contracts are about to be exchanged is going to be a hard property to gazump. However, if the offer was only accepted fairly recently then there still may be time to jump in with a higher offer.
If you are going to gazump someone then you will need to be prepared to pay a huge sum, even more than the house is worth. There is no point attempting to derail an offer with one that is only a couple of hundred pounds better. If you are going to gazump someone the offer you give will need to be several thousand pounds more.
However, it is worth remembering that no matter how much you may have fallen in love with the property, there is no point in getting carried away and putting in an offer for more than you can afford. The best thing you can do is remain calm and bid high enough as to tempt the seller but not so high that you cannot afford it.
Make Yourself A Desirable Option
If you are not part of a chain, you should play this to your advantage. Make it clear to the seller that you are not reliant on another sale going through and are not at risk of pulling out of the sale at the last minute.
If you are in a chain, but your property has already been sold then you should make this clear to the seller. Likewise, if you are in a chain but you have a mortgage approved or you are a cash buyer, you should mention this. Whatever you have that makes you a more desirable buyer should be made known to the seller.
When it comes to gazumping a sale, time is of the essence. The more time that passes, the closer the deal comes to completion with the original offer and so your chances of gazumping decrease with each passing day.
How To Gazunder
Similarly, to gazumping, if you are considering gazundering a seller, it is not a decision you should act on impulsively. By gazundering, you are not only taking money away from someone else, but you are also putting their chain in jeopardy and risk putting their lives on hold. However, if you are sure that this is the right move for you, there are ways that you can gazunder someone.
- Plan – If you are aiming to gazunder, you should make it a key part of your plan straight from the get-go. It is a wise idea to make an offer on two or three properties at the same time, but you need to make sure that you do this through different estate agents. Gazunder them all at the last minute and you can be confident that at least one should lower the price.
- Chain – It is important to ensure that whoever you are trying to gazunder is part of a chain. This will make them more open to your gazunder as they will want to complete the sale so that they can move into their new home.
- Backup – Another key to a successful gazunder is to have a backup plan ready. If a seller refuses to lower their offer you need to plan for the possibility of moving in with relatives or renting a new property until you can find a new house. Whilst it is not ideal, it is an eventuality you need to be prepared for.
- Legal Fees Low – It is a good idea to keep your legal fees to a minimum. You can do this by using a solicitor who offers a no-win-no-fee scheme.
- Keep It Quiet – Keep what you have planned a secret and don’t tell the solicitor that you plan to gazunder. It is a good idea however to ask about the subject in general.
- Close To Asking Price – Keep your original offer as close to the asking price as possible. This will make it so that little time will be wasted negotiating and the seller will be confident in the offer you have given them.
- Surprise – The element of surprise is a key part of the gazundering strategy, so avoid giving any clues as to what you plan to do. Choose a reasonable discount price of around 5% to 20% and ask for the discount as close to the exchange of contracts as you can. It is even better to do this after the seller has exchanged contracts on the property they are buying.
Should I Try Gazumping And Gazundering?
Whether or not you should try gazumping and gazundering is completely up to you as an individual. You need to bear in mind that both of these practices are in a moral grey area and you need to be prepared to do some pretty underhand tricks in order to get the results you desire.
However, if you truly believe that the property that you want is worth it, then there is nothing to stop you gazumping and gazundering in order to get it.
This covers everything you need to know about gazumping and gazundering. If you have any further questions, queries, or insight into the matter, get in touch!