Re: | Page 89

Gazundering Many people are very aware of the term gazumping – where a seller accepts one offer and then, before contracts are exchanged, accepts a higher offer leaving the original buyer high and dry or being pushed into offering more money for the property. But how many people know about gazundering? Gazundering is when a price is initially agreed for a property and the transaction will progress along in the normal way and then at the 11th hour the buyers will announce that they are reducing their offer for the property. This usually happens when house prices start falling (and at a time when we are fast approaching what could be an uncertain few months for the economy with the General Election looming) property prices could start to fall and a buyer may feel that they are suddenly paying too much for the property As with everything there are two sides to the situation and depending on which side you are on will depend on whether it is a good or bad thing. Obviously if you are the buyer then your advantages will be that you will pay less for the property, less stamp duty and, in some cases, lower registration fees. However there is a downside for a buyer – if a price change occurs at any point prior to exchange of contracts, and the buyer is getting mortgage finance for the purchase, then the lender will need to be made aware of the change of price and the matter may have to be reconsidered by the valuer and/or the underwriting team for the lender. This will invariably cause delays in being able to move to exchange of contracts and may even incur additional fees (for the lender and the additional work incurred by legal advisors in dealing with the price change on the various documents). For the seller there are few, if any advantages. At the point that gazundering takes place they are usually packed up ready to move and have certainly made plans for after the sale either with a new property to purchase or with money in the bank for the net proceeds of sale. Either way if a buyer is successful then this will reduce the amount of money that the seller has available following completion. That said it does not have to be all doom and gloom for a seller, Just because a buyer attempts to reduce the asking price does not mean that you have to agree to it. The property transaction is not legally binding until contracts are formally exchanged and any negotiations on price have to be agreed by both parties for them to be successful. However the decision does have to be made by the seller as to how much they really want to sell and whether the price reduction makes their future plans viable. The practice of gazundering, which although many consider to be immoral, is not illegal, and although this has been relatively dormant for some years now, it could be back with us for the time being. By Helen Fish 87