When one London homeowner agreed to sell his home for £3.5m two weeks ago he must have been thanking his lucky stars, given the state of the housing market. But his joy was shortlived. At the last moment before exchange the buyer reduced his offer by £250,000 – yes, gazundering is back.
Gazundering is where a buyer has an offer accepted and then at the last minute – without valid reason – vastly reduces it, by which point the seller is poised to move or has already exchanged on their next house, so is often forced to accept the new, low offer.
While many view the practise as “totally, morally reprehensible”, as Ed Mead of Douglas & Gordon puts it, there is no actual law against it. And if the price change is due to a delay in completion of the sale (during which time house prices may have fallen in the area) or the findings of a survey, it’s “actually perfectly reasonable”, says Mead. For example, celebrity good girl Holly Willoughby reportedly knocked £22,500 from her offer on a £1.645m London home the day before completion, due to damp problems.
If you can live with your conscience, and are happy to take the risk of the deal falling through, then how do you go about gazundering? Wait until the last moment before exchange – ideally the last 24 hours – and announce your new, lower offer. A drop of anything from 5%-20% is seen as reasonable among gazunderers.
Obviously, there’s a chance the sellers will reject your new offer, so if you can work on two or three properties at a time to play the odds, then do. Also bear in mind the cost of paying surveyors and legal fees. Find a solicitor who offers a ‘no deal no fee’ scheme to avoid the extra costs.
But how do you protect yourself if you’re the seller? If you can, then insist on a deposit from the buyer and a lock-out agreement, whereby they sign a contract binding them to the agreed price and completing the purchase. Other than that, don’t complete the purchase of your next home until you’ve exchanged on the sale of your current one. This gives you scope to reduce your own offer, passing the pain up the chain, as it were, if someone gazunders you.