What is gazumping?
Gazumping means when a seller accepts an offer from one buyer, but chooses to go with a higher offer from another buyer at the last minute.
As a buyer, gazumping can be understandably frustrating. Not only does it leave you without the property you had your heart set on, but it may also cost you the time, effort and money you have already spent on solicitors, searches, valuations and instructing a lender.
Is gazumping legal?
After weeks of preparation, It is normal for buyers to feel left in the lurch when they have been gazumped. Often, the one question buyers want to know is whether gazumping is legal.
Unfortunately for the buyer, there’s not much they can do in terms of protecting themselves and their money. Before contracts are signed, the seller is in no way obligated to sell you the property as they are not bound by a verbal agreement.
As such, gazumping is legal, despite the hefty cost it may come to you.
Finding a solicitor who offers a “No Move No Fee” policy can reduce the costs to you if gazumping occurs.
What is gazundering?
The definition of gazundering is the opposite of gazumping, in that it affects sellers rather than buyers. In a market where there are more properties for sale than there are buyers interested, gazundering can occur.
Gazundering is when a vendor accepts an offer from a buyer and can therefore proceed with their own property purchase. In many cases, the seller no longer accepts viewings from other potential buyers.
However, in the same way sellers can gazump buyers close to exchange, buyers can gazunder their vendor by reducing their offer close to exchange. The seller is then stuck, especially if they are relying on the sale money to fund their new purchase.
How to deal with gazundering
Just like gazumping, gazundering is legal and inevitably leaves buyers in a predicament. If they refuse the lower offer and have to find a new buyer, they may lose out on their new property. However, if they accept the lower offer, they may have to find the money from elsewhere to cover the shortfall on their related purchase.
The longer the lead up to exchange, the higher the risk. The buyer may wait until the last minute in the hope that the seller will be more likely to accept the lower offer for fear that if they don’t, the whole chain will collapse.
To try and prevent gazundering, do some research into your potential buyer. If you have a few offers on the table, remember a higher offer might not be the best. A buyer with a lower offer but not part of a chain or with a mortgage in principle might be a safer option.
Other things you can do to reduce the risk of gazundering
Market your property at a realistic price, as this may reduce your buyer’s need to reduce the offer closer to the time of exchange. Being aware of any parts of the property that might later cause a buyer to reduce their offer (for example after the survey) will prepare you for any negotiations down the line.
Buyers may want to keep their home on the market incase their buyer retracts their original offer.