Over the last two years, the UK housing market has seen house prices soaring to an all-time high as the number of properties for sale struggles to meet the demand of house buyers.
The market conditions have given house sellers the upper hand. This has meant several scenarios can be played out – from potentially playing buyers off against one another to push up the asking price, using sealed bids to accept best and final offers, to accepting a higher offer from another buyer (gazumping) after they’ve already accepted an offer from another house buyer.
However, a recent report has suggested that the rate of gazundering has increased to as many as one in two property transactions. But what is gazundering, and can you prevent it from happening?
What is gazundering?
Most of us are familiar with the term ‘Gazumping’. This is when a seller accepts a higher offer from a buyer after they’ve already agreed to the sale of their property to another buyer. This can happen up to the point of exchange of contracts as before this the sale isn’t legally binding.
It can be a massive blow to a buyer leaving them out of pocket if they’ve already paid for third-party fees such as pre-contract searches however it is completely legal.
Gazundering on the other hand is when a buyer lowers the price they are willing to pay for a property at the last minute. Often before exchange of contracts – it leaves a seller backed into a corner with little choice other than to accept the lower offer, especially if they’re in a chain.
Why would a house buyer gazunder a seller?
The data released by the ONS states the average UK house price was £286,000 in June 2022, which is £20,000 higher than this time last year. Prices have been at a historical high and buyers are left with no option to outprice their competition to get the property they want off the market.
Despite this, with economic pressure from the cost-of-living crisis hitting people hard a likely scenario is that some house buyers are using this as an opportunity to price chip against the asking price before exchange when a seller is most vulnerable.
The reality is that if the seller is in a chain – if they don’t accept the reduced price offered by their buyers the entire chain would collapse and therefore everyone would lose out.
Another scenario is that the buyer is themselves being offered less than originally agreed by their house buyer and therefore they have no other option than to offer less to their vendor.
A more credible situation when a house buyer may offer less than their original agreed offer on a property is if their property survey has uncovered an unforeseen issue that is going to be costly to remedy.
Red flag property survey issues that could affect an asking price
It is not uncommon for issues to be highlighted on a property survey, especially on homes over 50 years old. However, for a more serious issue, the cost to repair the problem may mean the buyer would be left thousands of pounds out of pocket.
It is therefore understandable that a house buyer may come back with a revised offer to offset the cost of the work required to repair the issues raised on a property survey if they weren’t already considered in the asking price of the property.
Some of the most common and costly issues that a property survey might highlight are:
- Asbestos – the use of asbestos was banned from construction in 1999 however it is not uncommon for it to be found in older properties. There is no immediate risk to health if it is well maintained and is still in good condition. If your survey highlights there is asbestos present it is best to seek professional advice to find out more about what type of asbestos is present, what condition it is in and what the potential cost is for its removal. If you’re buying a renovation project this is more prudent as you’re more than likely going to need to remove it as part of your plans.
- Damp – this may not be an immediate red flag and could be simple to fix by keeping a property well ventilated, warm and using a dehumidifier. However, for more severe damp issues e.g. rising damp you may need a specialist to investigate and carry out a course of damp proofing
- Flat roof repairs – flat roofs can often be found on garages or small extensions to a property. There are several different materials roofers can install to protect it. Alongside general wear and tear it may be that it’s no longer fit for purpose and needs replacing. Depending on which material you decide to replace it with will impact the cost as well as the labour involved to install it correctly.
- Insulation problems – by law a seller must have an up-to-date Energy Performance Certificate (EPC) before they market their property. A poor-rated EPC could indicate a lack of insulation to a property. At a time when the cost to heat a property is extremely expensive having a well-insulated property can make a huge impact on the cost to keep it warm. Some councils offer grants towards cavity wall and loft insulation so it may not be a huge expense depending on what is on offer where you live.
- Electrical issues – on older properties, if an electrical inspection hasn’t been carried out for ten years it’s advisable for the buyer to get an electrical installation condition report. A full rewire will cost upwards of £4,000.
- Japanese Knotweed or other invasive plants – while the advice around Japanese knotweed was recently updated the latest guidance, like any other invasive plant, is to keep it under control. If the house buyer’s mortgage lender requires a treatment plan to be carried out for them to borrow against the property this is where it can get expensive. Getting a certified professional to remove Japanese knotweed and dispose of it to the correct guidelines as well as carry out an ongoing treatment plan can cost thousands of pounds.
- Structural movement issues including subsidence – structural issues affecting a property are often fairly obvious, from large cracks to bulging walls, however, for house sellers, it’s important to make it clear of any you’re aware of from the offset. While it can put off some buyers some may not be too fazed by the cost.
- Roof issues – depending on the condition of the roof and what needs to be repaired, roofing issues could be as little as a few hundred pounds to several thousands of pounds.
Ways to avoid being gazundered
While it cannot be completely avoided – there are several ways you could help reduce your chances of accepting an offer from a buyer who is looking to reduce the asking price.
Set a realistic asking price
It can be extremely tempting, especially in a competitive market, to choose an estate agent based on the fact they’ve given you the highest property valuation. However, you should consider other factors when selecting who is going to help you sell your property.
Your asking price should be realistic of what your home is worth and an experienced estate agent will have done their research as to what properties, similar to yours, have sold for recently taking into consideration any known issues the house may have.
Furthermore, setting your asking price too high is likely to result in a buyer reducing their offer. At a time when the housing market has a lack of housing stock to meet the demand of house buyers chances are buyers will be quick to make an offer to get the property off the market. Despite their initial eagerness, after a while, they may decide to reduce their offer once they’ve had time to reflect on their initial decision. Setting a realistic asking price in the first place should help reduce your chances of this happening.
Move chain free
It’s not always possible but if you are fortunate to be inundated with offers from potential buyers, aside from price, being able to move chain free can significantly reduce the risk of being gazumped by your buyer. First-time buyers, for example, are less likely to have unknown affordability issues or additional costs crop up later in their property transaction that would cause them to lower their offer.
Keep things moving
Being proactive and staying on top of all the necessary paperwork as well as ensuring your conveyancer and estate agent are doing the same can help keep your buyer on side. As soon as they start to see delays, they may become frustrated which could lead to them reducing their offer at the last minute or even walking away from the transaction altogether.
Set a date for exchange
Similar to being proactive – getting a target date for exchange of contracts as soon as possible can help keep all parties focused on a particular date.
Be upfront on any known issues
Not making a buyer aware of a known issue could massively impact the sale of your property. As we’ve mentioned before there are several issues that a property survey could reveal – meaning your buyer could reduce the amount they are willing to pay for the property in light of the costs to repair these issues.
Being upfront on any known issues to your estate agent from the very beginning means that they can then help advise you on a realistic asking price and also inform potential buyers of the problem.
This helps manage peoples’ expectations from the offset and therefore can reduce the risk of a buyer reducing their asking price because of something unexpected by the property survey.
It’s also the responsibility of the vendor to disclose any potential issues as required by the question on the TA6 Property Information Form – failing to do so is a criminal offence.
Selling a property is equally as stressful as buying one and involves spinning many plates to keep everyone on their toes. However, keeping a level head and being realistic in your approach can help avoid being gazundered by any would-be buyers.
If you’re looking to move home and you are looking for a professional licensed conveyancer to manage your property move – get a free instant conveyancing quote from Enact conveyancing today.
