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Latest NewsTuesday 4th February 2020
'Gazundering', what it is and how to avoid it.
A recent survey found over 40 per cent of all sellers are concerned about gazundering, a practice which tends to increase when there is a flat or falling property market.
Here Jenna Hamilton-Pursglove, residential conveyancing expert with Rundlewalker Solicitors in Exeter, looks at this problem and offers some advice on how to ensure you sell your home at the agreed price.
What is gazundering?
Gazundering is when a buyer lowers their offer price just before exchange of contracts. As the seller, you are likely to be fully committed to the transaction. You will have already incurred costs, particularly if you also have a linked purchase. Having taken your property off the market, if you lose this buyer, you may feel you will be back to square one.
Sometimes a buyer may have a good reason for making a last-minute price reduction. For example, they may only just have received a survey that reveals a serious defect, or they may be trying to pass on a price reduction from further down the chain. Sometimes, the buyer may simply be taking advantage of the situation, relying on you not wanting the sale to fall through. Their actions may be unscrupulous, but, unfortunately, they are completely legal.
Government proposals to stop gazundering
Under present law, until exchange of contracts, there is no binding sale agreement in place and either party may pull out. Estimates suggest one in three house purchases fall through, resulting in £270 million in wasted costs every year.
The government is looking at ways to reduce this and is considering the introduction of reservation agreements. The details are not yet clear, however it is likely that both buyer and seller would pay a reservation deposit, in the region of £1,000, on accepting an offer. If one of them pulls out without a valid reason before exchange of contracts, that party would lose their deposit.
Although the government is trialling a pilot scheme, there is no firm plan for the introduction of reservation agreements as yet. Fortunately though, there are already some steps you can take to reduce the risk of gazundering.
Check out your buyer
Your estate agent should check your buyer’s credentials and their proceedability. A good agent should be able to negotiate fairly if a survey report reveals unexpected repair works or structural issues with the property. So, choose your agent wisely.
If you are in the envious position of choosing between proposed buyers, consider favouring those who are chain free. They are more likely to be able to move quickly and to have fewer issues, such as funding, that could cause problems later.
Sort out potential issues in advance
Remove any excuses your buyer could use for reducing the price. If you know there is something wrong with your property, either remedy it before putting your home on the market or be upfront about it. This can reduce the risk of price negotiations when a survey reveals the problem.
It is not just physical defects that can derail the sale. A buyer may also seize on legal issues to justify a price reduction, such as a home extension which does not have the right permissions or a parcel of land without good title. Discuss your plans with your solicitor before you put your home on the market and deal with any legal issues in advance. This will boost your chances of a smooth sale, at the agreed price.
Choose the right solicitor
Find a solicitor who is an experienced conveyancing professional, who will give you close personal attention. Proactively managing the legal aspects of your transaction will minimise the risk of delay. Keeping the parties well informed will avoid misunderstandings which can easily derail a transaction. So, make sure your solicitor is also a good communicator. The right solicitor will help keep your sale on track, at the agreed price.
For further information about buying or selling your home, please contact Jenna Hamilton-Pursglove on 01392 209204 or email firstname.lastname@example.org
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.