What is “Gazumping” and “Gazundering”?9th October 2020 5:19 pm Comments Off on What is “Gazumping” and “Gazundering”?
Many people might not be familiar with the terms “gazumping” and “gazundering”. Others may have heard of them but not really understand what they mean. Tthese terms are potentially extremely important when it comes to buying and/or selling property. In the recent past these terms have not been so prevalent, but in the current global Covid 19 pandemic these words may become more widely used as we have seen these practices used more frequently over recent months.
“Gazumping” is when the seller raises the sale price of the property at the last moment before the parties to the contract are contractually bound (i.e. before exchange of contracts); this means that the buyer must either accept the new higher price or withdraw from the transaction. “Gazumping” can also occur when the seller all of a sudden decides to accept a higher offer for the property from another buyer. In this situation, the original buyer either has to increase their offer again to “beat” the other offer, or walk away from the purchase.
“Gazundering” is nearly the opposite of gazumping and occurs when the buyer offers a lower purchase price than they previously offered and the seller accepted. This typically happens at the last minute, just before exchange of contracts so before the parties are contractually bound. This tactic is usually used when the parties are so far through the process that the buyer thinks the seller might accept a lower price to avoid having to remarket the property and start again. Rapidly declining property prices are usually a vital element in gazundering. This may become popular if the property market in England & Wales becomes volatile.
Can Gazumping and/or Gazundering be avoided?
It is extremely difficult to prevent gazumping or gazundering.
There are certain situations in which it is perhaps more likely that either one of these tactics will be deployed. For example, a buyer is probably less likely to be gazumped by a seller if the seller has a related purchase (there is a “chain”) as the seller is unlikely to want to put his own purchase at risk if the sale falls through. Likewise, gazundering is much more likely to be a tactic used by an investment buyer than someone who is buying a home as the buyer is unlikely to try to gazunder the seller if they are emotionally invested in the transaction completing.
It may be more likely that this type of issue will arise in a situation where the transaction is progressing slowly for some reason. If issues are identified along the way as a result of a survey or searches, a buyer might opportunistically seize upon such issues to try and get a bargain. If the purchasers are being slow to respond the seller may feel that they lack commitment to the transaction and invite more viewings and other offers.
If the seller or buyer initiates the unscrupulous acts of either gazumping or gazundering then their respective conveyancers can do very little in this regard and will have to follow their client’s instructions.
In essence, the faster you complete the transaction, the less likely it is that there will be an opportunity for for gazumping and gazundering to feature in your transaction. This provides both sides less opportunity to be opportunistic with regards to the transaction and less time to introduce changes in the price.
Should you wish to discuss any residential property transactions then please contact a member of our Residential Property Team on 01628 631 051 or firstname.lastname@example.org
This post was written by Colemans Solicitors LLP