Published: 01/03/2023 By Lucy GoodgameAlmost a third of UK home sellers are now being gazundered by their buyers, according to a new study by House Buyer Bureau. When surveying 1,104 UK home sellers who have sold a home in the last six months, it was found that three in 10 vendors (31%) had experienced gazundering during their last property transaction.
Gazundering refers to suddenly lowering the amount of an offer made to the seller of a property, usually just before the exchange of contracts. This puts the seller, who may have already committed to buying another property, under pressure to accept the lower price to ensure their sale and purchase actually goes through.
It’s the opposite to gazumping, which involves a buyer offering a higher price for a property in order to break an already existing sales agreement. While gazumping was more commonplace in recent years, with demand high and stock low, it seems that the cooling down of the market has increased the levels of gazundering.
Why is Gazundering on the rise?Essentially, the cooling property market is putting buyers in a stronger position to negotiate.
According to the Royal Institution of Chartered Surveyors (RICS) Residential Market Surveyin October identified an overall weakening of the property market, and particularly noted a drop in buyer enquiries. Additionally, Nationwide’s most recent data shows that UK house prices have fallen for four months in a row.
The supply of homes for sale is also improving, according to Zoopla. Their data shows that the average estate agent office had 24 homes for sale compared with 15 a year ago, providing more choice for homebuyers, and therefore more room to haggle.
Chris Hodgkinson, Managing Director of House Buyer Bureau, explained: “We’ve heard a lot in recent years about the backhanded practice of gazumping, with high demand and inadequate stock levels resulting in many buyers trying to outbid their rivals right to the death. However, the market has certainly dropped down a gear or two in recent months and we’ve started to see the record rates of pandemic house price growth start to subside.”
The results of the House Buyer Bureau survey supports this sentiment that buyers are exploiting their stronger position, with 19% of respondents reporting that their buyer was simply after a discount.
However, the survey also showed that the rising cost of living and ongoing impact of the disastrous ‘mini budget’ are a contributing factor, with 11% reporting that the mortgage of their buyer was adjusted due to increasing mortgage rates, and 5% of buyers no longer being able to afford the property.
What Should Vendors DoBeing gazundered, particularly when it happens very close to the point of exchange, causes an enormous amount of stress for vendors. 33% of respondents affected by gazundering said it had happened within a week of their exchange date. Of course, this puts considerable pressure on sellers to accept the lower offer or risk losing their buyer and, potentially, their onward purchase.
As many as 75% of sellers polled decided to proceed with the transaction, accepting the lower offer. Of those that didn’t, 21% said the sale ended up collapsing.
When asked why they decided to continue on with their original buyer, many responded that they didn’t want to jeopardise their onward sale, while many sellers also didn’t want to waste more time finding another buyer.
Chris Hodgkinson advises sellers that current market conditions means that they should be open to negotiation, saying "despite these cooling market conditions, there remains an air of stubbornness amongst the nation’s sellers who are yet to fully accept this change in market temperature and, as a result, almost a third are being gazundered with a lower offer having originally agreed on a price with their buyer.
"While this trend is being driven by opportunistic buyers to some extent, it’s important to note that in many cases, it’s due to issues found during the survey and the resulting down valuation. Therefore, while many sellers are being gazundered, they are proceeding on the basis that the secondary offer made is still a fair one.”
"This is quite a natural occurrence in any market conditions and so buyers should be advised that, while there may be further room for negotiation after their offer is accepted, acting bullishly in order to lowball their seller could result in them losing out on their dream home.”
What to expect in 2023While most industry experts don’t expect the housing market to crash, it is widely expected that house prices will continue to fall this year.
With the shift from a sellers’ market to a buyers’ market, the number of buyers lowering their offer is likely to rise, meaning that gazundering will become more commonplace.
However, it is worth saying that the property market has remained somewhat resilient considering the economic situation the UK is currently in. This would suggest that the price drops should not be too dramatic and that the majority of sellers can accept the secondary offer, assuming it’s still a fair one.
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