Is there a way to stop gazundering and gazumping?

Gazundering and gazumping. They may sound like bizarre children's games, but in reality, they are very devious ploys used for financial gain in property transactions in an already confusing system and competitive market.

Gazundering is a tactic aimed at persuading a seller to accept a reduced offer for their property. The most typical form of gazundering is for a buyer to lower their offer just before the exchange of contracts. Sellers are naturally reluctant to refuse, as they may be part of a chain and the thought of putting their home back on the market is daunting. The gazunderer hopes that this pressure will force the seller to accept less than the originally agreed price. 

With gazumping, on the other hand, it is the seller's turn to act selfishly, leaving the original buyer in a difficult position. Imagine, you submitted an offer on your dream house and it was accepted! Time to pour the champagne...? Not quite. Before you know it, you've been gazumped. Despite shaking hands on a deal with you, the seller accepts a better offer from another person. Gazumped buyers are often out of pocket, having spent a significant amount of money on surveys and legal fees. According to a Market Financial Solutions report, 31% of UK homeowners were gazumped in the last decade, and for those in London the figure rises to 47%.

So now we know what gazundering and gazumping are, it's time to see how you can guard against them.

Seller’s defence against gazundering

Engage a reputable estate agent

An experienced and competent estate agent can help you avoid shady buyers in the first place. Having dealt with all sorts of customers, they know every ploy and trick so can minimise the risk. 

Check out prospective buyers

Before accepting their offer, establish whether a buyer has a mortgage agreed in principle. If they don't, it could be a sign that they can't afford the asking price and intend to pitch a lower offer later in the property buying process.

Take some of the pressure off

You don’t have to rush to buy before you sell. You might be coming to the end of the mortgage or not have high early repayment charges. Even if you do, most mortgages allow you to sell and keep your mortgage for 6 months before you have to buy. 

It's worth checking if it’s an option, anyway. If you can hold off on buying, it’ll be harder for a buyer to successfully gazunder you, since you won’t have to accept their offer to get the property you want to buy.

Encourage buyers to have an early property survey

If your buyer waits until late in the selling process, it increases the risk of last-minute renegotiation since they’ve not already invested any money and have little to lose by doing so. It is often a sign that a purchaser isn’t committed when they don’t incur any costs, and increases the risk that they may lower their offer. Ask your solicitor and estate agent to speak with the buyer and persuade them to have a prompt property survey. 

Prepare your documents and don't delay

Do all you can to move the conveyancing process along quickly. Get any certificates required and provide paperwork as soon as you're asked. By keeping up the momentum of the sale, the risks of being gazundered are reduced. 

Set the date!

Ask your buyer to agree on a date when contracts will be exchanged. By establishing as early a date as possible, you increase the chances of a quick sale and minimise gazundering opportunities. If your solicitor is dragging their heels, chase them up and tell them to push the buyer's solicitor too. 

Buyer’s defence against gazumping

Act fast

Book an early survey and complete any necessary paperwork as quickly as possible. Speed is of the essence as it reduces the gazumping window. To that end, get a mortgage agreement in principle as soon as possible.

If you do this before you make an offer, you’ll get a better idea of how much you can afford too. Then once your offer is accepted, ensure this gets turned into a mortgage offer as soon as possible, because banks are notorious for delaying the process.

Engage a conveyancing solicitor

You can do this in advance and shop around for the best quote. Your solicitor can keep the conveyancing process moving, so respond to any requests they make quickly. 

Get the property listing removed

When you make your offer, ask the seller to take the house off the market as a condition. Although sellers don’t have to do this, it’s a potential red flag if they’re unwilling, as it increases the risk of being gazumped. 

Lock in your agreement

Lock-in agreements are binding pledges that the property seller won’t negotiate with any other potential buyer for a fixed time. The agreement should be drawn up by a solicitor and cover all eventualities. However, it’s a very expensive agreement to set up through a conveyancer and often costs the same amount you would lose from a failed purchase.

Typically, the buyer and seller pay a deposit and if either back out of the sale or, without good reason, attempt to change the price, the deposit is forfeit. It should be said though that there is a substantial risk of an unfair legal outcome here, as significant issues can’t often be identified in old properties.

Options for buyers and sellers

Consider insurance

Being gazumped or gazundered can cost you more than wasted time and unnecessary stress. On average, failed transactions incur losses of £2,700. While it is an extra expense, Home Buyers or Sellers Protection Insurance covers gazumping losses and might give you peace of mind but only pay out in exceptional circumstances and won’t protect against the most common issues.