You may have heard the terms 'gazumping' and 'gazundering' before, but be unaware what they mean.
They're certainly two words you wouldn't expect to find in the Oxford English Dictionary.
But in the property world, they're two words that are worth understanding - particularly if you're a buyer
Gazumping and gazundering: What are they?
Gazumping is when a buyer's offer has been accepted and the purchase process is under way, only for the seller
to accept a higher offer from another buyer.
Gazundering is less common than gazumping, but sees a buyer lower their offer late on in a sale - often just before the exchange of contracts.
What is gazumping?
In a market dominated by sellers, where multiple buyers are scrapping to secure the same property, gazumping is far more common than anyone would like it to be.
You can be a long way through the process of buying your dream home, even at the point where you are about to exchange contracts, only to see another buyer step in at the 11th hour and secure the property for themselves with a higher offer.
If you are gazumped late on, it can be heart-breaking - not to mention expensive if you've already paid out mortgage arrangement fees, survey costs and some solicitor fees.
In the worst cases, a buyer may have already sold their existing home and be left with nowhere to live.
What is gazundering?
Although less common than gazumping, cases of gazundering can increase in markets like the one we're experiencing across the UK currently, where sellers are seeing lower levels of interest in their properties.
That means they can find themselves in a weak position when accepting an offer - and buyers will be well aware of this to a point where they often lower their offer knowing the seller has no other options on the table.
Are gazumping and gazundering legal?
In England and Wales a property sale is not legally binding until the contracts have been exchanged, so that leaves the door open for gazumping and gazundering.
There are moral issues with both, but many argue the property market is simply a dog eat dog world and both gazumping and gazundering are par for the course.
How to avoid being gazumped
Any buyer could potentially be gazumped, even in a market where they are holding the aces.
So, how can you avoid it happening to you?
Get the sale completed quickly
The best way to steer clear of being gazumped is speed.
By that, we mean getting your property purchase over the line as quickly as possible, leaving no time for a cheeky buyer to come in and wipe out your offer.
Things you can do to speed up the sales process as a buyer include:
* Getting a mortgage agreement in principle before making an offer
* Arranging the services of a solicitor before making an offer
* Speaking to a surveyor before making an offer, so they can undertake a survey early in the process
Request the property is removed from the market
Any good offer should also come with a request that the property is removed from listings.
While taking a property off the market is a decision for the seller, requesting this should always be in the mind of you as a buyer.
If you're offer is on the low side, you should expect the seller to refuse this request as they may wish to keep their options open should another seller come in with a higher offer.
If you're really worried about being gazumped and you've made a good offer, you could consider asking the seller to sign a legally-binding lock-in agreement meaning they can't entertain offers from anyone else.
This agreement sees both the buyer and seller pay a small deposit which is refunded once the sale is complete, but handed to the buyer should the sale be gazumped by another buyer.
There are costs involved for drawing up a lock-in agreement, so consider this beforehand.
How to avoid being gazundered
Like gazumping, it's always a possibility you could be gazundered as a seller.
And as with gazumping, the best way to avoid it is to get the sale completed as quickly as you can.
But there are also other steps to you can take to protect yourself.
Go with a chain-free buyer
Of course, this is not always possible and a good offer shouldn't be turned down simply because the buyer is in a chain.
But if you can go with a chain-free buyer this will often see your sale complete quickly.
And as chain-free buyers are likely to have fewer costs to consider compared with buyers in a chain, they are less likely to lower their offer late on to compensate.
Set an exchange date early
This keeps the pressure on and can keep your buyer focused on a particular date, meaning they are less likely to consider a lower offer late in the process.
Set a realistic asking price
If your asking price is too high but a buyer falls in love with your property, they could consider offering high to secure it before reducing their offer further down the line.
Being realistic with your asking price is the best way to convince a buyer they've got a good deal.
Use a good estate agent
An experienced agent will know how to deal with a buyer who fancies trying their luck with a lower offer late in the sale.
This could make a huge difference, as a good agent will be able to convince a buyer that their original offer constitutes a good deal.
What to do if you're gazumped or gazundered
To be honest, if a seller or buyer is intent on gazumping or gazundering, there's not a whole lot you or an estate agent can do.
In the case of gazumping, a buyer has two options: Either cut their losses, or make a higher offer than the gazumping buyer.
Speaking to the seller can help in this case, as there may be a more in-depth reason why they have accepted a higher offer late on.
The most important thing in a gazumping case is not to get in above your head financially. It can be tempting to dig in and refuse to be beaten, but if this means taking on a mortgage you can't afford, you'll only pay for that decision further down the line.
For sellers who find their buyer trying to gazunder them, they also have two choices: Either accept the lower offer, or pull out of the sale and seek another buyer.
Like with gazumping, it's important to establish the reason why the buyer has amended their offer late on.
This could be because of a poor survey, in which case a discussion with the buyer could find a solution that doesn't result in a lower offer.
Communication is key when it comes to both gazumping and gazundering, so always be prepared to negotiate in both scenarios.
But most importantly, do what's right for you.
If you have a property to sell or are looking for a new home, contact your local CJ Hole office
who would be more than happy to help you.