Are you looking to sell your house and buy another? In this article I will look at an issue some sellers face during this process. A practice known as “gazundering”.
What is gazundering?
If you’ve been on the property ladder for a while, you will no doubt be aware of the practice of gazumping. This is where a home seller accepts a better offer on their home despite already having sold it to someone else (subject to contracts being exchanged). This is not illegal but it is most certainly unethical, and no one wants to be involved in buying a home where the sale goes like this.
These unethical situations don’t just happen to buyers though. “Gazundering” is a practice whereby a buyer lowers their offer at the last minute, just before contracts are exchanged. This is an awful situation for someone selling their home to find themselves in as, if they don’t accept, the entire chain could fall apart. Not wanting to loose their new home, or to cause distress to anyone else in the chain, sellers often feel compelled to accept the lower offer. This means they can be left severely out of pocket and this can affect the mortgage on their new home.
Protection from gazundering
So how can those trying to sell their homes protect themselves from gazundering? Well, the first thing to say is that you are not under any obligation to accept the lower offer. If you are in a situation where there isn’t a huge chain, and perhaps you haven’t found your new home yet, your best option may be to refuse the new lower offer. You will have to take a hit on the solicitors fees, but this may still be the best option.
If you are really concerned about the possibility of gazundering though, a safer option might be to take out home buyers protection insurance. This isn’t a very well known type of insurance, but can be very useful for both sellers and buyers alike. With one in four house sales falling through in the UK before completion, this is a very real issue, and one you may want to consider protecting yourself from.
In addition to this, other ways to avoid this unnerving practice happening to you is to be realistic about your selling price to begin with. Really, like many things, homes are only really worth what someone will pay for them. The other thing you can do is to move quickly, don’t drag your feet on the sale, keep things moving.
Selling a home and buying a new home are incredibly stressful, there’s no way around that. However, minimising the potential financial stress and difficulty that could arise from a situation of gazundering by taking out insurance, could be the reassurance you need. We hope of course, that we will never need this, but having it there just in case might be really important.
Have you heard of gazundering before? Do you know anyone who has been in this situation? What was the outcome?