Selling a property is an arduous process in which many things can go wrong.
One of them is the buyer lowering his or her original offer before contracts are exchanged.
However, with little knowledge and planning (before you put your home on the market), you can avoid tough situations that make selling your home all the more stressful.
This article, which is part of a series of articles on the residential conveyancing process, will discuss what is gazundering and what measure a seller can take to avoid being in such a position.
What is gazundering?
Gazundering is the act of the buyer reducing his or her original offer at the last minute before contracts are exchanged.
When a buyer lowers their offer, the seller with only two options: accept the reduced offer or refuse it. This can be stressful, particularly in property chains, if the seller does not have another offer to fall back on.
Is gazundering legal?
While a buyer may be devastated by this act, unfortunately, it is not illegal. There is no legal obligation on a buyer to stick to his original offer until the exchange of contracts.
Further, as gazundering is a blanket term used to describe when a buyer lowers his or her original offer, it does not necessarily mean that the buyer is trying to be unfair.
What can cause the seller to lower original offer?
A seller can be gazundered due to numerous reasons:
An overextended buyer
It is not uncommon for a buyer to fall in love with a property and fallaciously believe that they can afford it only to start having doubts before exchanging contracts, whether paying such a price is sensical.
At other times, a buyer may have miscalculated how much they can afford.
These situations can lead to the buyer reducing his original offer.
An unexpected survey result
Once the seller accepts the offer, the conveyancing process can begin.
As part of the process, the buyer will carry out a home survey that tells the buyer about the property's condition. (You may be interested in reading about the different types of property surveys or how long does a property survey take).
Survey results are often used by buyers to get the seller to accept a lower price, as a buyer would want the property's value to be adjusted for the price of repairs or any significant works that need to be carried out.
However, by the time a buyer gets the survey report, it is usually a few weeks into the conveyancing process. A keen buyer may put up an offer to beat other potential buyers before he or she fully understands the extent of work necessary but expect to be able to negotiate on the purchase price based on the survey report.
The buyer finds a more suited property
Many buyers continue to look at other property options even their offer on a property is accepted. If the buyer finds a more suited property, it may change his or her view of what a fair price for the property is.
This can lead to the buyer lowering their original offer.
Collapse of the property chain
Often people buy a new home and try to sell the old one at the same time. If for any reason, their sale is held up, it will impact your deal, and your buyer may no longer be able to afford to stick to the original offer.
The buyer's mortgage offer expires
An amazing one-third of the property transactions fall through due to delays in the conveyancing process.
Once a buyer gets a mortgage offer, it is only valid for 6 months. If there is a delay in the process and the transaction cannot be completed within 6 months, the buyer's mortgage lender may not extend the offer past 6 months, leaving the buyer with only more expensive mortgage offers which they cannot afford.
To find a more affordable mortgage, your buyer may reduce his or her original offer.
Dump in the market
If the property prices drop due to a dump in the housing market, the buyer may be forced to lower his offer regardless of the agreed price.
How can you avoid it happening in the first place?
Getting an offer on your property may be an exciting time. If it's your first time selling a property, you may not be able to pick out serious buyers from those who are just chancers trying to save money.
That does not necessarily mean that you will not be gazundered if you have been through the process of selling a property before.
Here are some measures you can take to avoid being gazundered.
Set a realistic sale price of the property
If you set a fair price for the property (that is in line with the property's market value), there is a lesser chance that your buyer will gazunder you.
Often before surveys are carried out, the buyer is in a rush to secure the sale and offer above the asking price. However, after the surveys have been carried out and the buyer has had time to rethink, they may decide to lower the offer.
Pick a chain free buyer
If you get a good offer on the property, you should not turn it away just because the buyer is in a property.
However, if you are fortunate enough to have multiple offers on your property, of which some are chain free buyers, they are more likely to move quickly, and you'll be free from risks of collapse of the chain.
Move on the sale as quickly as possible
The conveyancing process is long and complicated. By the time you exchange contracts, it'll be anywhere between 8-10 weeks after you accept the offer.
You need to regularly check up with your solicitor or licensed conveyancer (as well as estate agent) to get an update on how far along the process you are. Further, your solicitor or licensed conveyancer should also be in constant contact with the buyer's solicitor or licensed conveyancer to ensure things are moving smoothly.
Usually, the seller and the buyer do not have direct contact. Agent and solicitors prefer it this way. However, if possible, you should stay in touch with the buyer. If you can build a relationship with them, they are less likely to try something underhanded.
Set date for exchange of contracts
Once contracts are exchanged, it is legally binding on the parties to complete the transaction. However, a lot has to happen before contracts can be exchanged.
You can speed up the process leading up to the exchange of contracts by taking just a few measures. You can read about the measures you can take to speed up the conveyancing process.
Be upfront about known problems with the property
You will be setting yourself up for a fall if you are not completely transparent about known issues with the property.
The buyer will get a survey of the property to find out about what condition it is in. Further, the buyer will also check the Land Register, so whatever you try to hide is bound to come to light due to the surveys and property searches (such as Local Authority Search) the buyer will have carried out.
You can read more about what are Local Authority searches in our separate article on this subject.
Solve any issues
If you get a bad property survey highlighting issues that were unknown to you, you can also offer to get the issues fixed rather than accepting a lower offer. No buyer will want to have contractors in their new home right at the start.
Check out our information article to read more about what you can do after a bad property survey.
Employ a proactive solicitor or licensed conveyancer
There is a lot a solicitor or a licensed conveyancer can help you with if you are selling a property. However, if they are inexperienced, it can lead to delays in the conveyancing process and end up costing you the deal.
The buyer's solicitor or licensed conveyancer has to carry out most of the work involved in the conveyancing process. Whereas the main job of the seller's solicitor or licensed conveyancer is to respond to queries from the buyer.
Therefore, the importance of a proactive solicitor or licensed conveyancer who can foresee the buyer's concerns and attempt to resolve those issues is second to none.
Further, you may also choose to hire an estate agent (most do) to market your property to a larger group of potential buyers.
(You can read further regarding whether you need a solicitor or a licensed conveyancer in our article. Further, if you choose to hire a licensed conveyancer, be sure to go through our article on using a licensed conveyancer instead of a solicitor).
A few last words
In every property transaction, there is potential for something to go wrong. When it does, it is often too late for the parties to recover.
However, with little knowledge of the conveyancing process, sellers can foresee what can go wrong and plan for it accordingly or take measures to avoid it happening.