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Stop Buyers From Gazundering You

Donna Werbner

By

Donna Werbner

My latest blog

Fame And Fortune In The City

1

10 October 2008

Published in Property and Home on 22 April 2008

House prices are falling and gazundering is coming back into fashion. If you're selling your home, how can you ensure you get the price you wanted?

In my last article, Capitalise On House Price Falls, I looked at the murky world of ‘gazundering': when a buyer reduces his/her original offer before exchange of contracts. The article looked at reasons and circumstances gazundering may occur, and stressed that, to be successful, buyers need to be able to justify their decision.

It proved to be a controversial article, sparking off a passionate debate on the ethics of gazundering -- and, indeed, the morality of the article itself.

Many Fools questioned whether gazundering could ever be justified and criticised the article for "encouraging one of the more unsavoury practices in the housing market".

Others praised the article for "telling it like it is", arguing out that if, during the course of negotiating the purchase of a house, the value of the property dropped and they were forced to stick with the original offer, they would feel ripped off.

So Is Gazundering Ever Ethical?

Well, it's certainly legal -- at least in England and Wales.* Whatever your ethical stance, you're allowed to both gazump and gazunder. It is up to the individual to decide whether their honour is worth more to them than the price they achieve for the property they are buying or selling.

Looking at ethics, I think most of us would agree it is underhanded and dishonest to go into a purchase planning to gazunder the seller once he or she has taken the property off the market and is in a weaker position.

But what about the buyer who finds his chosen property has fallen, perhaps significantly, in value since he made his original offer? Is that buyer as equally morally reprehensible as the buyer that planned to gazunder all along?

After all, since prices dropped by 2.5%, on average last month, this is the reality -- and dilemma -- that many buyers are facing right now.

Is it right that these buyers should pay over the odds for a property that may well fall further in price?

Help For Homeowners

Personally, I could go on debating the ethics of gazundering till the cows come home (and since no cow can claim my home as their own, that may be some time).

If you are a homeowner, however, you may be more interested in what you can do to protect yourself from potential gazunderers -- be they ethical or not. Alternatively, if you are currently in the process of selling your home and have just received a gazundered offer, you may need some advice about what to do next.

So, ethics aside, here's some practical help for sellers.

How To Protect Yourself

  • Set a realistic asking price. The less time it takes you to get an offer, the less desperate you will be to sell at any price. Be aware that some buyers will check how long the property has been on the market and whether it has been reduced in price, and will use this information to try to negotiate a further discount.
  • Research the market carefully and try to figure out what your property is worth objectively. Look at whether any similar properties are on the market, and how much they are going for. Then factor in what your property is worth to you: i.e. your absolute lowest price. If this is all you can get from a buyer, make it clear from the start that you will not drop the price in the future no matter what happens.
  • Be prepared. Make sure your solicitor has all the legal documents the potenital buyer will need before you even get an offer. Dig out any relevant certificates, e.g for damp-proofing or double-glazing. Copy keys for the estate agent and surveyor. Get your HIP sorted. Consider renting if that frees you from a chain.
  • Opt for a chain-free buyer if you can. The quicker that buyer can move, the more valuable the offer. A buyer who already has a mortgage offer in place and can move fast may be worth lowering your price for. So ask your estate agent to find out these vital facts before they put an offer to you.
  • Be upfront and honest about any defects. If the buyer is aware of problems like subsidence or a short lease from the start, it is far more difficult for them to turn around later and use this as a reason to haggle down the price. Ask the estate agent to ensure the buyer is fully aware that such defects have been factored into the asking price and you would not be prepared to negotiate on these points.
  • Remember, you're not safe until you exchange. So incentivise the buyer to speed up the housebuying process. For example, you could accept the offer only on the condition that the buyer gets a survey done within 10 working days, and refuse to stop showing the property until the survey has been completed. Or, if you're particularly ruthless, you could warn the buyer you're going to keep it on the open market until the contracts have been exchanged. That will ensure you haven't lost any time if the buyer does decide to gazunder at a later date.
  • Be friendly, but not too friendly. If you can develop some sort of personal relationship with the buyer, it will be harder for them, emotionally, to go back on their word. But don't reveal any facts which might make them think you are desperate to move.

Help For Gazundered Sellers

If you are a seller and a buyer has just tried to gazunder you, there are ways you can fight back. The following fantastic advice was provided by JenniferSEvans,** a conveyancer who commented on the bottom of Capitalise On House Price Falls.

Don't panic, as you may make statements which you do not mean or are incorrect. State that you want evidence of their reasons for reducing the offer (e.g a similar property has fallen in price, or the survey revealed a hidden problem) and wait for them to prove it to you.

In the meantime, do the same research as the buyers. Check prices in the area and ask builders for a free quote, so that you understand your position fully.

Wait until after you have received the buyer's documentation and your own before you decide whether or not to accept the offer. If you can see the buyer's side of the story, try and be reasonable. Maybe you could make a counter-offer which you think is fair. There are two sides to negotiating!

This process should help you to see where the buyer is coming from. If your conclusion is that their expectations are completely unrealistic and unreasonable, consider the chances that the same thing might happen again with another buyer and the costs you would lose on this sale.

Ask yourself: Which is more important to you, the sale or the money? With the facts on your side, you should find you are able to live with whatever decision you make.

* Gazundering cannot take place in Scotland, where the initial offer on the property is legally binding. (There are flaws with this system too, but that's another article.)
** Jennifer's words have been edited.

More: Capitalise On House Price Falls | Why Homebuyers Can Afford To Be Patient

> Find a marvellous mortgage via The Motley Fool Mortgage Service

Got your own views on gazundering? Listen to our Money Talk podcast to hear Fool writers Donna Werbner and Laura Starkey debate the topic with David Kuo.

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Comments

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michaelthelamb 23 Apr 2008, 6:18am

Advice to sellers. Someone tried to gazunder me once after having already negotiated on price. I told the estate agent that I was not going to sell to them. This held up things for three to four weeks after which they were in so much pressure from their end of a chain that they decided to pay the agreed price. During this period, the agents tried to get everyone in the chain to move. Some of the weaker sellers wanted to move prices to make it work, but not all. The agents at this stage were only interested in protecting their own chain commission, rather than acting on their clients' (the sellers) behalfs. So my advice to people wanting to avoid gazundering would be two-fold:
(1) don't move on price after it's been agreed, unless there are justified reasons for reduction. Ask to see the survey as proof.
(2) sell to a chained buyer - chain free buyers are exactly the kind of people looking to gazunder and give you a lower price in return for a quick sale. This is only a good strategy for the seller if you are existing the housing market, or if you can get the same reduction from the property that you are buying.
(3) write into your agent contract that you will not sell to a gazunderer, or pay any marketing costs if this occurs. This puts the onus on them to vet clients better and not present you with the gazunderer
Gazunderers are chancers

BobHoskins 23 Apr 2008, 8:40am

I was 'gazundered' last week. After agreeing the price with the buyer at the outset I declined later higher offers. Unfortunately the buyer turned round on exchange day and asked for a 10% discount on the agreed price, with no justification other than 'the market'. Aside from being very angry what can I do? Nothing.
Of course, next time I'll be tempted to accept more than one offer as insurance, which I'm uncomfortable with but I cannot afford for this to happen again.

stumac100 23 Apr 2008, 8:45am

Donna, I am glad you have written this article, particularly in the light of the last one on the same subject.
I am just about to put my own house on the market (and to also start looking for another one to move to).
I would agree that Gazundering is a fair and sensible tactic if your survey has turned up something that was not declared on the sellers HIP.
However, to simply try to do this on the basis that the "market has dropped 2.5%" last month is completely unnacceptable, and in the end boils down to trying to rip someone off.
Is a buyer supposed to be completely ignorant that a market is in decline when they make their original offer?
I feel that the scottish system in this aspect is far better than the one we have here.

NorthAthenian 23 Apr 2008, 9:05am

I notice that both Donna and stumac100 have implied that the Scottish system prevents the practices of both gazumping and gazundering. Perhaps it may be helpful to add a comment. Under our system, the contract is made on the so-called 'exchange of missives', which occurs once an unconditional offer has been made and accepted. However, it seems increasingly to be the practice that offers are made subject to various conditions, some of which may be justified and some perhaps less so. In a weak market this gives the buyer some leverage to negotiate on price after the initial written auction has taken place. Thus the Scottish system is not quite as straightforward as is sometimes portrayed. I suppose however that at the end of the day the two parties have to agree on what a house is actually worth, whether in Scotland or in England and Wales, and this may involve compromise on both sides. It's just the route in Scotland that is different.

janetx 23 Apr 2008, 9:05am

Sorry to be flippant about a serious matter but I am charmed by the verb "gazundering". I had only heard of the noun "gazunder" (as used for a chamber pot which goes under/ gazunders the bed) so does this mean the housing amrket has gone potty?
I'll get my coat.....

andylawrence 23 Apr 2008, 9:06am

My sympathies to BobHoskins on your forced 10% discount.
Unfortunately we are living in the 'Golden Balls' age. I refer to the ITV game show presented by Jasper Carrot where members of the public are encouraged to put cash ahead of honour and trust by lying to and stealing from their fellow competitors.
So concerned am I that this is a bad example to set, I have banned my children from watching it.
Sorry this is a little off topic. It really is a jungle out there!

AmIFoolish 23 Apr 2008, 9:13am

What is it with the "Halifax report says House prices are sliding" brigade? ... Does it really? or is this only a headline grabber's view?

Iain Maitland, in his UK Property Alerts e-zine, on 19th April wrote:

If you read the March Halifax report you will find that it says:

The biggest rises were in Greater London (1.6 per cent), East Anglia (1.4 per cent) and East Midlands (2.2 per cent). There were price falls in a number of regions with the biggest falls in West Midlands (-5.0 per cent) and Wales (-4.7 per cent). Source: www.hbosplc.com/economy/HousingResearch.asp

So why didn’t the headline read:

'House prices increase at an annual rate of 26.4 per cent in East Midlands'

yesterday he added ...

Assetz have just released their review of the five major UK house price indices which show an average 3.9 per cent annualised growth to the end of March 2008.
... the three and six month moving averages of monthly growth show that growth has stabilised at near enough 0 per cent since the start of the year and that prices do not appear to be falling ... [Assetz are] suggesting a possible return to upward movement if the mortgage market unclogs over the next few months.

Being a Fool, I have possibly come to rely on this website and its financial reporting, giving it's view more weight in preference to other sources that I read. Is this perhaps a Wise thing to do?

If the papers and the rest of the media are bleating about Falling House prices because their greatest interest is in getting the Wise man in the street to pick up their paper, instead of the one next to it, or watch their news program, rather than the one on the other channel, should The Fool follow in their tracks? The Fool made a name for itself by providing well researched, well balanced, information and Foolish advice. Is this really still the case?

I don't know whether the housing market is going to crash. Granted, the signs aren't good (and if the Wise man is panicking, perhaps the Foolish man should be thinking about "How to gezunder the sale") ... but there is a reasonable amount of information about, which also suggests that the reported Halifax figure may just have been a little bit skewed ... statistically speaking* ... so where is our balanced view from the website which used to be proud to be Foolish and go against the Wise view?

*Of course, old wisdom dictates that there are 4 sorts of liars ... "Liars, Damned Liars, Statisticians and Politicians"

onepk 23 Apr 2008, 9:21am

I wish people would stop peddling the myth about the so-called binding offer in Scotland. As I understand it, it has never been true (merely considered good conduct)and is more and more broken these days. If you drop out (before missives are concluded ie before exchange of contracts) for 'commercial' reasons you might have to find yourself a new solicitor, but they are not exactly thin on the ground.

Iniq 23 Apr 2008, 9:21am

I have, over the years, sold several houses in rapidly rising markets (in one instance, doubling in six months ...) but I would never gazump, and therefore would never accept a gazunder.
My excellent solicitor advised "If you get an acceptable offer, tell the prosctive buyer that you will accept his offer PROVIDED he completes within six weeks. (Could be less, perhaps 4 weeks nowadays, with HIPS) Explain that a house is not actually sold until completion. During those six weeks it will therefore remain on sale, the sale board will remain in place and viewing will continue - although viewers will be told that an an acceptable offer has already been made, subject to deadline. If the deadline is met, you complete at the agreed price. If, however, there is even one days delay or any attempt to drop the price, the house will immediately be offered to another prospective buyer."
And STICK to this, even if any delay is due to the prospective buyer hitting unexpected problems which are not of his making. Tough - that's his problem, not yours.
If during the six weeks you get a superior offer, say you will consider this if the deadline is missed - they won't have long to wait.
During one housing boom I had one couple who made a much bigger offer during the "waiting period" and were baffled and furious when I said that I would be delighted to accept their offer but only if the original would-be buyer failed to complete on time. They only had a few weeks to wait, but they couldn't get their heads round the ethical principle of sticking to an agreement - a principle which works both ways!

nitnot 23 Apr 2008, 9:23am

My advice - CALL THEIR BLUFF! I received a reduced offer hours before exchange of contracts on an empty property I had already reduced at my agents suggestion. A bit of research showed that my buyer was waiting to exchange on his own house so I told my agent to advise my buyer that unless contracts were exchanged that day he must put the house back on the market at the original asking price. Contracts were exchanged within the hour!

FinchleySquire 23 Apr 2008, 9:23am

I'm due to sell my flat soon. I'm not buying anywhere, so am in the fortunate position of being able to sit this out.
Firstly a note on the various indices. These are all measured in different ways: The Land Registry is most reliable as it is a view on all sold prices - however, it is around five months out of date. Both Halifax and Nationwide provide indices based on their mortgage originations. In this market they are likely to be a moving base as the lenders target market changes. That said, I believe these indices to be mix-adjusted which will account for some change. And finally there is the Rightmove asking price index which is a useful view of vendor sentiment and realism as prices adjust. So, when the gazumper suggests that house prices have dropped it is useful to ask them where their information comes from.

Secondly, can the gazumper really afford to try to bargain? This is likely to depend on the profile of the purchaser, but we have recently seen many mortgage offers pulled by lenders. So the purchaser is under pressure to complete the mortgage - or find their offer is pulled and they cannot afford to buy the property regardless of vendor discount. Perhaps pressure could be put back onto the purchaser, reminding them that they also need to complete soon and they can't afford the time for another round of negotiations.

Good luck all!

Karen8022 23 Apr 2008, 9:30am

Hello

To second what others have said about the Scottish System. The initial offer is not legally binding. In two of our house sales, after initial offers were accepted and surveys done, our buyers pulled out due to not being able to sell their own houses. A friend who went to a sealed bid, accepted an offer, only for the buyer to pull out when they found that the next best offer was significantly lower.

Hudges 23 Apr 2008, 9:33am

I wonder whether the questioners of the morality of 'gazundering', would accept or reject an offer from a 'gazumper'?

jorisanimiho 23 Apr 2008, 9:33am

Hi,
Donna, I find it astonishing that you can attempt to describe your previous article as being something of an impartial view at the 'murky world of gazundering' when you were so blatantly offering advice on how to 'gazunder successfully'!!! If I just click on your link above your disgraceful article will display all evidence!!!
Need I say more of your integrity (or lack of)??

Baldolgit 23 Apr 2008, 9:37am

Sorry to be pedantic but the term is Gazumping!
A Gazunder refers to the item that gazunder a bed at night i.e. a Potty!
And yes it is highly stressful to get gazumped - we were , three times during one purchase!
And, sorry but you can get screwed by the Scottish system as well - the mother-in-law did - and quite badly - thanks to unscrupulous advisors.

dmb6 23 Apr 2008, 9:46am

Well we've got 2 valuations on our house today and one booked for Saturday in the hope of getting it on the market soon with the view to move up the ladder and I can assure you yesterdays article kept me awake last night!!

But todays article has been a valueble source of information, thank you so much for the tips from Michaelthelamb and the information that IAmFoolish provided, this has made me feel slightly better!! I have to agree with Nitnot and calling the bluff of any gazunder will be exactly what I do should the unfortunate situation arise

The only issue I have now is that I'm in the West Midlands!!

BobHoskins 23 Apr 2008, 9:51am

nitnot - bluff called. Flat back on the market (in a weaker market than it was a couple of months ago).

Hudges - gazumping offer declined (because it was the honest thing to do). Still stitched up though.

btw the article states that you should opt for a chain free buyer where you can. Good advice I'm sure, but my cash buyer had no chain or mortgage worries.

houstonstewart 23 Apr 2008, 10:03am

When it comes to Gazumping, you may want to consider this ...
I was purchasing a flat to let out, seller was dragging heels on paperwork. Obviously know now was strategy to see if could get better offers than our agreed sale price. Because wouldn't you know it, he got a higher offer and was holding me to ransom to BETTER it! So I played ball, I offered substantially over 'the rival bid' which frightened off new buyer and left my seller smug with his new deal. I then held off on exchange to ensure other buyer was well off the scene and yes, that's when I hit with my Gazunder. A Gazunder below my original asking price! Because I was buying only to rent the property and he was selling so he could move on to his new home (or lose it), he now faced what he had reaped and the deal went through at my reduced price not his ransom.
Yes, he could have gone elsewhere but I was prepared to let him, he needed a sale more than I needed his particular flat. Morale is 'careful who you screweth lest you be screwed yourself!'

Hardtruth 23 Apr 2008, 10:07am

Why would anyone ever be under the impression that any deal is a fixed object before it is signed and sealed?

SiGl26 23 Apr 2008, 10:20am

Can any Fool tell my why the UK apparently cannot make the first offer contractually binding on both parties? This works in other markets, usually backed by an 'earnest money' deposit which the buyer loses if they pull out. Material faults in the property give grounds for withdrawal or negotiation, but gazumping and gazundering are nigh-on impossible. In some markets the binding offer is time-limited, which puts a rocket under surveyors, lawyers and local authorities to deliver their part

ascentium 23 Apr 2008, 10:43am

I have had people try to gazunder at different times over the last 20 years. (As a landlord, I've bought rather more properties than most.)

What I've done, if the reason is anything other than "something unexpected turned up in the survey", is explain that the market state has been well known, and that I will be instructing my solicitor to write up what they have done and circulate it to all local estate agents. I add that Estate Agents have a duty to disclose all material facts to sellers, and that the fact that the "buyer" is a known gazunderer may cause them problems.

Oh, and I've never gazumped or gazundered in all my years of being a landlord.



Unrelated tip, only really important for landlords - always try to sell to your existing tenants first. That way you don't get a void, save on estate agency fees, and (according to the legal advice I've received - but you should take your own), don't need a HIP if you are offering the property to an existing tenant and not marketing it elsewhere.

iqnetsys 23 Apr 2008, 10:54am

A simple protection we should all adopt. This is very simple. Only accept offers from buyers willing to pay a £1000 non refundable deposit to your solicitor. You will get less viewings but they will be serious and they will think hard about dropping out or trying to re-negotiate. Your solicitor should be able to draft a simple contract for this. It's not so much about the morales as much as about the devastation to your life when it all goes pear shaped. If we all took this stance, it would soon become the norm. It's not such an obscure idea, if you are buying a new house, it's expected of you.

chaz25 23 Apr 2008, 11:37am

Sad Times indeed. Twas a time when a man's word was his bond. But buyer's have not been beyond gazumping in rising markets. I guess the obtain a non-refundable deposit, or auction is good advice!!!! Also like the agreement with estate agent to include no marketing fee if offer subsequently reduced.
BUT for the buyer to reduce their offer on the exchange day is BLACKMAIL.....
Would suggest informing those making offer that (unless for substantive survey reasons)that the house will be offered to others interested who have put in provisional offers if they change the terms of their offer before completion.

bouleversee 23 Apr 2008, 11:48am

I think you will find most agents will refuse to show the property to anyone else once an offer has been accepted. Ours didn't continue to market it to anyone else once an offer had been made, let alone accepted. I got the impression that they were working for the buyer rather than us.

Taradiddle 23 Apr 2008, 12:10pm

We sold a house in Helensburgh, Scotland, in 1977. We were told there could be no problems, what a laugh. I'd been drafted to Portsmouth so I had to move by a certain date. The sale was going through so we left the house empty and move into married quarters in Portsmouth, kids into new schools etc. Then the buyers said they couldn't sell their house without dropping the price so wanted us to drop our price. Our solicitor (who we found was also acting for the buyer) dumped us onto a solicitor in Edinburgh without consulting us. This solicitor was shortly to retire, we found out later. Both times I phoned him his voice was slurred (this COULD have been old age!). There was 'something in the post' that never arrived. we ended up with a new buyer, having had to pay two estate agents fees (in Scotland you pay the fees if they find you a buyer whether or not the sale is finalised!) and finished up over £2000 out of pocket on a £20,000 sale. The old solicitor died, I got drafted overseas and gave up.

Iniq 23 Apr 2008, 12:15pm

Quote: "I think you will find most agents will refuse to show the property to anyone else once an offer has been accepted."
An agent will do what I darned well tell him and what I pay him to do. Otherwise he won't be my agent. Me customer. I pay his salary.

matchmade 23 Apr 2008, 12:23pm

I've had the same experience as Iniq: I've already had one sale fall through due to my buyer's buyer dropping out on the day of exchange without explanation. My new estate agent has put enormous pressure on me to accept my new offer from another buyer and take the property off the market, because apparently the buyer doesn't want to risk losing his survey and mortgage valuation fee. When I protested and said I'm the one therefore left with all the risk if the buyer drops out, he said "that's the English system". Next time I am definitely going to insist on a non-refundable deposit, because all the cards seem to be in the buyer's hands in our system - it always seems to be buyers who break chains, never sellers.

rospax 23 Apr 2008, 12:49pm

I was buying a house in 1997, subject to survey. On the afternoon of the very day the survey was conducted, the vendors backed out of the sale. I had no redress and no security of any kind and the agents were unable to help. This cost me almost £500. What's the name for that kind of behaiour?

economistmum 23 Apr 2008, 12:53pm

The most effective 'insurance' against gazundering is to use two competing estate agents. Yes it will cost slightly more but it is a strategy that should always be used.
Any estate agent is insufficiently compensated to wring the maximum price out of your property and for them it is cost and time effective to settle for a quick sale and move on. Once a sale is agreed they are not going to show the property to other purchasers but instead deflect them away to other possibilities. From their vantage point two ( or more) slightly smaller sales are more profitable than maximising the sales price of any one property when they only receive a very small percentage of any additional revenue. By using two estate agents ( and NO I am not part of any trade group) you will set up a competition between agents ( especially if they loathe each other) to sell your property for the highest price, and you should be able to receive more than sufficient extra revenue ( aka higher price) to compensate for the slightly higher sales commission.

maryfairy 23 Apr 2008, 1:04pm

Its time the way houses are marketed was given a good shake up. I sold my London flat in June 2006 having taken a cash buyer's offer of 200K which was just over my asking price of 199,950, in Nov 05.
It took until June to complete and the London market was going up all the time. I was tempted I can't deny. to increase the price before exchange when the buyer had become overly demanding (in a sellers market!). The property had gone up £30,000 by June 06 but I took the original offer that the buyer had made in good faith because as houstonstewart said here earlier, Treat others as you would yourself be treated!

McLeodC 23 Apr 2008, 1:36pm

Guzumping and gazundering may not be legal in Scotland, but they're not criminal offences. Both practices can and do occur. The aggrieved party is entitled to take civil action for damages, and would probably win their case. But very few people are prepared to risk the time and legal costs involved, especially when they're desparate to move house.

EricGrobb 23 Apr 2008, 3:12pm

I sold my house in February and the buyer tried to gazunder me at the very last minute by £100k on a £1.4M sale.
I gave him 48 hours to sign the contract at the agreed price and said that if he didn't the sale to him was off. He signed.

GORDIEtheGURU 23 Apr 2008, 3:34pm

DO NOT DEAL WITH GAZUNDERERS.
Well..I hate to tell you all this but the property market is NOT on the way down. Not down substatialy anyway, and here are the reasons why.
Over the last few months the longer term buy to letters have sold more than they would have done because they have been faced with the loss of tax taper relief on their investments if they sold after April 5th 2008, which in effect would have been a near doubling of the tax they would pay. As buy to letters tend to operate at the lower end of the price market the averege type of property sold compared to a normal month, over the last few months, has not been a normal monthly representation. In short this means that this average price is distorted in a downward fashion. My understanding is The land registry acts on the conveyences documentsthey recieve and the registrations take a few weeks possibly months to filter throught the system. Yes the land registry does seasonally adjust the prices but it does not adjust them because of tax changes and pressures put on certain sectors of the market to sell, that were introduced by the 'strange' chancellor. So when you hear 4% down since November that makes sense because the buy to letters need to complete before the end of the tax year. Press and media comment will undoubtedly keep prices where they are or down a touch as the country has in effect talked itself into it price fall. My opinion is buy now but put in a low offer as them public have been 'brainwashed' into thinking lowers house prices and its just not going to happen to any degree after all interest rates are low and are going lower (1/2 a percent down by the end of the year) so get in now...there are plenty about!!!

MuppetFool 23 Apr 2008, 6:41pm

I am a first time buyer. I have a large deposit (25%+) and I am very loyal and will not gazunder anyone without reason - but if the bottom of the market drops out, I will reduce my offer; I would be stupid not to. I got caught out by a despicable seller 8 months ago, his actions cost me £2k when I was scrimping and saving to buy my first flat. Well now its my turn and I trust no-one.

bazmonaut 23 Apr 2008, 7:42pm

Interesting article and some great advice and views from posters. I read it with interest as I am about to sell my house.
As an interesting aside, it is worth noting that property sales seem to be exempt from normal contract law (not sure why). For anything else, offer made and accepted = binding contract, whether it's verbal or written.
Another interesting aside (because I am so interesting), in Australia this is exactly how it works. If my 'cobber' (friend) says 'oi, I'll give you a dingo's kidney for yer old tin shack', and I say 'you bewdy' (yes), that's offer made and accepted = legally binding contract. It's up to me as the buyer to commission surveys etc BEFORE I make my offer, as once my offer is accepted it's binding on both parties. Simple, fair and easy. Now, where's my dingo...? Here boy!

jacobyte65 23 Apr 2008, 7:57pm

As far as Gazumping is concerned, this was endemic in the 1980's and I believe legislation was enacted to deal with it. As far as gazundering goes I had three members of a family circle independantly gang up on me, using this and other methods in what they thought were pressure tactics, they didn't know me and I pulled the plug on them, game over.

compman 23 Apr 2008, 11:24pm

A couple of comments above relate to the disincentive for estate agents to get the best price. A £1000 increase at 2% commission gives them £20. Has anyone considered stepped commission? Say house value is £200K. Agree 1.8% up to valuation, then 5% for each £1000 up to £210K etc. There is no reason why commission rate should not escalate dramatically for a really good price. This incentivises the agent to get a better price and resist attempts to reduce any offer.

gillianswain 24 Apr 2008, 2:33am

Ten years ago I went in search of a property to rent in order to provide for my retirement. I saw a property which was of interest but told the Estate Agent that I didn't want a property with any major structural problems because I had only recently been widowed two months before and was not able to take on much more than decorating as there was only me to do the work (a 4 foot 11inch female - don't want to appear a wimp but I guess size does matter !!!). The Estate Agent said there were no problems and could I let them have my Solicitors name as soon as possible (great urgency was stressed with regards to this) so I set up a Solicitor. I then had a survey done and Asbestos was found in the central heating (just to have another survey done to determine what type of Asbestos and the cost of removing it would have been very expensive) and tree roots in the drains were a distinct possibility. So I had paid several hundred pounds for the Survey without any chance of redress from the Estate Agent (they would have denied anything I said) plus the additional cost of the Solicitor who, at least when I told him what had occured, only charged me a nominal £100 fee. Also the last time I put a house on the market I did it without an Estate Agent and sold it over the weekend thus saving the fees. So once again it is let the buyer (and seller) beware. Also I agree, don't put up with and type of gazumping or gazundering (keep your house on the market until contacts are exchanged). If you have to use an Estate Agent (and I question the necessity of this - try a newpaper, supermarket, shop window advert first) expect them to only have self-interest at heart so an upwards sliding scale of percentage fees is a good idea. If you are a buyer beware and certainly don't trust everything you are told. It's a jungle out there. Talking of jungles, I've just found this dingo pinching my dog's food - any chance of finding its owner....

weebarney 24 Apr 2008, 12:14pm

I think it is acceptable to gazunder in the event that 'prices have fallen by 2.5%' or so. I sold a house to my tenant but she took much longer to organise her finances and the properties I was interested were at that time going up quite fast so I was tempted to ask her to up the price. I didn't, but the value of a property is constanly changing dependent on other factors so it is not unreasonable to amend an offer up until contracts are exchanged. However, I agree, planned gazundering is below the belt especially as most sellers are home owners just trying to improve their 'nest' rather than speculators (like me) who take a cold commercial view of the transaction.

hakerite 24 Apr 2008, 1:55pm

What an excellent discussion board - just about every point of view. Holding a smallish portfolio and some experience, I would just say it is a market place, even though it may be someone's home. - If I buy a share on the stock market at £2.00 a share at 10.00am and it drops to £1.80 at 11.00am ... HMMM
Be ruthless.

50something 24 Apr 2008, 9:34pm

There can be no question about it: deliberately setting out to buy a house with a view to dropping the offered price just before the exchange of contracts is unethical and helps undermine the whole housing market. If you see that the market is falling, then ask a sensible price/ make a sensible low offer in the first place. People who initially pretend to proceed with a purchase at the seller's original asking price dishonestly exclude or dissuade other purchasers from putting in their own offers meeting the asking price. Correspondents who think that it's just being commercial to take financial advantage in this way know nothing about real business & commerce. If their views reflect society in general then maybe we all deserve a total housing market collapse!

tanyadaly 25 Apr 2008, 9:10am

All these people saying gazundering is unethical Im sure would have no qualms in being involved in taking a higher offer at the last minute, leaving the buyer in the lurch. People only complain when its something bad happening to them. Im glad gazundering is alive and well, after years of greedy agents and housesellers, its about time us first time buyers get the chance to beat them at their own game.

DAQ80 25 Apr 2008, 9:28am

I don't think that there is anything wrong with gazundering based on the survey, or if in the course of the time taken to exchange (ie if you're being messed around) the situation has changed either with your financing or the market generally.

I haven't ever gazundered but last year I pulled out of buying a home following a survey and some extra research into the price of local houses using the trusty interweb. I don't think there is anything remotely underhand in this. My own situation was that the house we had put an offer in for was built of an "unconventional" type and following a bit of research into lenders, some had recently stopped lending on the type. We also eventually found out that we were paying significantly more than any other house in the row had gone for in the past couple of years - something alluded to in the survey. In this case I have absolutely no regrets of pulling the plug and I'd advise anyone in a similar position to do the same.

LandieWag 25 Apr 2008, 10:14am

Over the years I have bought lots of propertties and neve enetered into the practice of gazuandering or gazumping. Gazumping is underhanded and a malicious practice which should be made an illegal practice. If yo ugo into a show room to buy a plasma tv, hi fi system, printer etc that is on the floor at a set price you don't get to the till point and say that your not prepared to pay that price you'll only only pay this price..the sale person will laugh at you and say next customer please.

Buying a house should not be the long drawn out protracted exrcise that only benefits the solicitors, estate agent and the government (the idiots tax STAM DUTY!!) it should be amended so that we have the same system as in Scotland. If a survey brings up any defects with the property, then that is a negiotaing point but the property will remain on the market until contracts are exchanged. If you go looking for some things you want yo ushould have done all the research BEFORE you start entering into what should be a legally binding contract to proceed unless a survey identifies structural defects.

uktc 25 Apr 2008, 10:28am

I have tried to incentivise agents along the lines set out by compman. Not a whiff of interest or initiative from four of them who dominate the area of sale. One of them even smirked when stating that the `present practice and standard contract serves us and vendors very well thank you`. I checked my dictionary and there is no f in cartel so that`s all right then.

50something 25 Apr 2008, 11:12pm

In answer to those claiming that those of us talking about ethics wouldn't hesitate to take advantage personally, I am in the process of buying a property where prolonged legal correspondence (own solicitor, seller's solicitor, management company solicitor) means that 4 months after meeting the seller's price we haven't exchanged but my own solicitor is suggesting that the property market has now fallen 5%. However, I know that the seller's original price already reflected the falling market (he had already dropped his asking price by £70k and was £100k below a similar neighbouring property advertised with another agent). So would it be ethical for me to squeeze another say £10 or £20k off the price one week before exchanging? This would amount to fraud as far as I am concerned, and anyone who argues differently is effectively saying that it's OK to commit theft so as to be able to afford a property just beyond their budget. There's a big difference between finding a fault in a survey etc and the practice of seeking to defraud the seller by dropping the offer for no reason other than to take advantage just before exchange of contracts.

angelikatomic76 27 Apr 2008, 4:05pm

I am in the process of buying a flat and my solicitor found out that the seller failed to disclose to me, after being asked twice, that there will be expensive repairs to the property very soon, which will fall onto me to pay for. Don't you think this is good enought reason to renegotiate the price? I think it is outrageous to be lied by the vendor and estate agent!

spexii 28 Apr 2008, 7:39pm

Compare it to buying something in a shop which then goes on sale. You couldn't take it back to the shop and say "the price has gone down, refund me the difference" - they wouldn't do it. You knew when you bought the item that at some point in the future the shop would have a sale, but you bought the item there and then for whatever reason (you didn't want to risk it being sold out by the time the sale came, or you needed to use it sooner rather than later, or perhaps the shop wouldn't put the item in the sale). So, you paid your money and took your choice - you valued buying the item now more than getting a bargain.

If you believe that we're in a falling housing market, and you want to pay less for a house because you think it's overvalued (or likely to get cheaper in future), then you should be taking your chances and putting in a lower offer to start with, or waiting to see whether the seller reduces the price, as would happen in a store sale.

Of course, in the sale analogy, you can buy insurance against your goods being reduced in the sale (this is often sold as part of store cards - though I'm not recommending it as I bet it's expensive and few people actually make claims!). If you have this, you *can* claim back the difference. So maybe in this case, the buyer has another option, which is to take out insurance against the housing market falling during the completion period. Is that currently possible? (And yes, this is reminding me a bit of the stock market/financial markets in general, but as hakerite said, this is just another market).