The whole Gazump/Gazunder debate

[MrXxxx]

This article got me thinking;

https://www.msn.com/en-gb/money/other/gazunder-alert-how-the-uk-s-house-buyers-are-forcing-sellers-to-slash-prices/ar-AA1jtKH2

...is gazumping/gazundering really that bad?...is it just that the British sense of 'fair play' in a deal a little naive?...OK, none of us like to lose but is it morally that bad to 'change the deal' at the last minute...is this not just 'business' where the other party has a choice whether to accept or reject the sale?...now it  could be argued that 'moving the goalposts' just before exchange of contracts can result in the 'offended' party losing money, but is it not imperative on them to make the deal 'water tight' so that this doesn't/cannot happen i.e. holding deposits etc?...if you are/have been in such a position and let the deal fall through has it been for the right reason i.e. financial rather than ego/emotional...surely to do the latter is poor business as you are 'Cutting your nose off to spite your face'?

Thoughts/comments?

[Boon]

Seems a bit of a shit article.

Proper gazundering I think is rarer than proper gazumping (the type where the offer changes after costs have been incurred), I assume that might have happened quite a bit in the post-covid melt up when houses were exceeding the offer price. And a lot of it done by the unscrupulous type of buyer, the 'we buy any house' or multi-BTLer.

I would think most of the gazundering now is survey or valuation related. It seems fair enough that a buyer should seek to change the terms of the deal should one of these not agree with their valuation, because when you view somewhere you might miss things.

It seems totally incredible to me that one should have the attitude 'well you thought it was worth that amount when you bid, so you should pay it', but you can see that people do.

[Andersen]

Gazundering can be valid or can be a pisstake. Often it's because a survey has found unexpected faults that need expensive repair (I offered on one place - by chance opened the loft hatch during my viewing and could see daylight through a big hole in the tiled roof. Buyer then got a quote for £25k to replace the roof - if I'd found that after making my offer I'd have been reducing my offer significantly!). I sold a place and the buyer wanted to drop their offer price, they flagged some fault with the garden fence to justify their revised offer - the fault was so minor I couldn't see it but prices were dropping and I wanted to move asap so I accepted. Market trends affect anything that's taking a long time between offer and exchange - I offered to buy a nice place, my solicitor & the sellers' were both incompetent so I pulled out when they failed to meet my 4 month deadline to exchange contracts, if that had been in a time when prices were dropping a lot I'd have thought seriously about reducing my offer or pulling out.

There have been many reports of We-buy-any-house companies dropping their offer price on the day contracts are due to be signed. Anyone using that type of company is desperate and the co know it, very underhand but it's still legal. A great summary of the way they operate at https://www.readysteadysell.co.uk/cash-house-buyers/

Gazumping used to be a thing but I've not heard so much about it in recent years. A friend bought in Glasgow a long time ago and told me most desirable places set a closing date for offers then go to "Offers over asking price". Maybe that system is fairer for everybody??

According to something I heard a long time ago the 3 most stressful events in most peoples lives are death, getting married, and moving house. Be lucky  

Edited November 7, 2023 by Andersen

[Axeman123]

Fundamentally, without a contract in place nothing is firm. People playing silly fuckers after exchange of contracts on a property is almost unheard of in the UK, and adequate remedies already exist for those that try it on in that way. That contract cannot be binding without due dilligence, which takes time.

The most practical way to reduce the scope for fuckery between offer and exchange would simply be to make the process more time efficient. The long delay makes market movement in the interim innevitable and encourages keeping viewing second guessing etc. Searches are literally just checking databases, which shouldn't need to take weeks as it currently does. Useless solicitors taking weeks to respond to simple queeries and requests for electrical certs etc (sometimes because they are useless, others because they are doing so tactically on client instructions) could be improved by a code of conduct and professional sanctions for the worst instances.

The worst possible way forward would be to instead create lots of pointless jobs as an add-on to the existing process. Contingent contracts like in the US (AIUI) where any change to the offer or one party pulling out has to go through lawyers and can end up in court would be a solicitors' job creation scheme, as well as surveyors etc as everything would have to be documented to a standard that would stand up in court. Having some kind of pre-deposit to forfeit if pulling out would just raise the stakes for the above, and raise transactions costs dramatically. The last thing this market needs is friction and obstacles to price discovery.

[janch]

2 hours ago, Andersen said:

Gazundering can be valid or can be a pisstake.

This happened to me a few years back.  The gazundering was a complete pisstake and meant the whole chain collapsed.  I was selling to a first-time buyer and couldn't afford to take the lower price so told them to piss off.  The price had been agreed several months before and there were no issues raised by the buyer's survey.  Prices were stable at the time too. The buyer waited until exchange of contracts before saying he was reducing his offer.  Evryone had incurred some costs so it was a complete pain.  The agent was not best pleased especially as they had been quite active in keeping all the chain happy.

I cut my losses and waited a few months before starting again with a different agent.  I did sell the second time with no problems.

[MrXxxx]

4 hours ago, janch said:

I cut my losses and waited a few months before starting again with a different agent.  I did sell the second time with no problems.

Question [please feel free to ignore if you would rather not answer], when you finally sold did you make less/more, accounting for:

1. The sale price,

2. Your costs incurred from the first 'aborted' sale,

3. The opportunity loss from having the funds from the initial sale for x number of months i.e either BS interest rates OR stock capital accumulation.

[Wellesley]

I will hold my hand up to being a gazunderer. We had agreed a price but seller had to go through a long process of separating the plot at Land Registry as they'd built their new house in the front garden. This took ages and it was late 2007, the last property crash time. They had also slipped a special term into the contract saying no changes without their permission. Considering the property was so old and worn out they'd built new for themselves I thought this was proper dodgy.

Once they finally sorted the plot out (8 months or so) we made the new offer based on the drop in value during their delay and scrubbed the permission term. They decided to go ahead and we completed. She was mighty pissed when we demolished it and put up a 'hideous monstrosity' in its place.

I consider it fair game, until exchange it's a negotiation with a variety of inputs such as searches, survey, market changes, etc. I'd agree that the process is horribly long and needs reform urgently.

[janch]

19 hours ago, MrXxxx said:

Question [please feel free to ignore if you would rather not answer], when you finally sold did you make less/more, accounting for:

1. The sale price,

2. Your costs incurred from the first 'aborted' sale,

3. The opportunity loss from having the funds from the initial sale for x number of months i.e either BS interest rates OR stock capital accumulation.

I don't remember exactly but I don't think it made much difference so neither  gain or loss except in my sanity!! The original estate agent expected me to put it straight back on the market but I needed to calm down first so I withdrew for six months or so and then started again.

In the meantime prices had gone up a bit so it was advertised at a slightly higher price but the place I eventually bought would have gone up by the same so no gain or loss there.  I lost on the searches for the first aborted sale which was a small amount....I can't remember how much.....probably less than £50.

[MrXxxx]

7 hours ago, janch said:

I don't think it made much difference so neither  gain or loss except in my sanity!!

:-)))

[Pip321]

On 07/11/2023 at 21:55, Wellesley said:

I will hold my hand up to being a gazunderer. We had agreed a price but seller had to go through a long process of separating the plot at Land Registry as they'd built their new house in the front garden. This took ages and it was late 2007, the last property crash time. They had also slipped a special term into the contract saying no changes without their permission. Considering the property was so old and worn out they'd built new for themselves I thought this was proper dodgy.

Once they finally sorted the plot out (8 months or so) we made the new offer based on the drop in value during their delay and scrubbed the permission term. They decided to go ahead and we completed. She was mighty pissed when we demolished it and put up a 'hideous monstrosity' in its place.

I consider it fair game, until exchange it's a negotiation with a variety of inputs such as searches, survey, market changes, etc. I'd agree that the process is horribly long and needs reform urgently.

I have bought and sold for 25 years and made a lot of money because of one reason….I secured and was offered many great deals because I never gazundered. My negotiations were mean but they were upfront. 

Of course my circumstances were different…I needed that reliable reputation but many who did what I did were cut throat and dropped prices last minute. Great idea but I was making money whilst they had to fight for their deals because their reputation preceded them.

With normal transactions its all about circumstances…..sometimes a legitimate change in the deal or market moves things significantly.

I had a gazunderer in a strong market about 20 years ago. Just trying his luck, he was an ‘investor’. He was buying my renovated property £135k and I had accepted £131k around January…hoping for exchange in the tax year. Last minute he wrote a letter saying that he wasn’t sure about the deal, was going to think about dropping the price but couldn’t decide on an amount and would let me know if he would proceed at all after his 3 week holiday abroad. In a rising market.

In a falling market or if some material issue has arising I may have taken the hit….but this guy genuinely thought (for some bizarre reason) that I would just take it. 

I instructed the agent NOT to contact him at all. They could of course ‘respond’ to him should he contact them…but they must not proactively go back to him. I told the agent ‘he isn’t sure about proceeding’ and to re market at £135k (it was now sunny March…and two new listing in the street were £145k).

Within a day we had agreed £135k with a delighted first time buyer….who was aware of the other chap and they raced and exchanged within 4 weeks. I had verbally told them that we would not give them backword if they moved fairly quickly and kept us all informed of any issues. 4 weeks was a delight but I would have easily accepted longer.

The initial buyer still hadn’t got back to us….obviously thinking I would be now panicking.

When they did come back to us both the Agent and also myself (directly) told him he had clearly said he was no longer sure about the deal….so we had to assume the worst and had moved on.

The buying process is far too long and relies too much on the buyer not really having to commit until the last minute….with ‘real’ house sales and chains, jobs, families involved there needs to be a much better way. The Scottish system isn’t the answer with buyers sometimes having to have 4/5/6 valuations before securing somewhere.

The main issue is the speed….it need not take as long as people suppose. Buyers should have mortgage (subject to valuation) in place and solicitors and councils doing searches should move 5 x as fast.

Buying an house isn’t overly complicated and Exchange within 3 weeks is achievable in most cases if everyone is answering emails, filing in forms, doing searches, getting FENSA certificates, instructing valuers etc as soon as the price is agreed upon. 

Edited November 12, 2023 by Pip321

[Wellesley]

57 minutes ago, Pip321 said:

The main issue is the speed….it need not take as long as people suppose.

Agree, I am one of those filthy landlords and had one on sale recently. Got an acceptable cash offer but it was from a property scheme type company who bought distressed stuff, did it up then rented to vulnerable people. Very poor communication through the process until after 3 months they finally said they didn't have the cash and couldn't proceed. Back on the market, offer next day and sold 6 weeks later to a motivated first time buyer for a higher price. I did get shafted though, their solicitor insisted on a £120 indemnity policy because it was unadopted road.

[Pip321]

On 12/11/2023 at 10:11, Wellesley said:

Agree, I am one of those filthy landlords and had one on sale recently. Got an acceptable cash offer but it was from a property scheme type company who bought distressed stuff, did it up then rented to vulnerable people. Very poor communication through the process until after 3 months they finally said they didn't have the cash and couldn't proceed. Back on the market, offer next day and sold 6 weeks later to a motivated first time buyer for a higher price. I did get shafted though, their solicitor insisted on a £120 indemnity policy because it was unadopted road.

Thx. Interesting.

If I have the choice I no longer sell to investors (cash or otherwise)  because they have no skin in the game. Sold a bungalow this year and we had 2 offers and we took the movers over the investor. Went through like a dream. 

Subsequently found out the investor has had 2 fall through last minute because he tried to chip. (Whether the sellers should have backed out with this market is another debate😉)