If you’re looking into buying a house, you’ve probably heard the terms gazunder and gazump being used by property agents and industry analysts. While they may sound like characters from a kid’s TV show, these terms both refer to last-minute offers when buying a house.
What does gazump and gazunder mean?
“Gazumping” is when another party makes a higher bid on a property that’s already under offer, securing the sale. Specifically, it means that the seller had a verbal agreement with one buyer but breaks it to go for the higher offer.
If gazumping is making an over offer then a gazunder offer undercuts an existing agreement. The term refers to when a buyer drops their offer right before the exchange of contracts. The seller must then decide between accepting the new, lower offer or starting the process of setting up a sale all over again.
While Gazumping is a nightmare for buyers, gazundering leaves sellers in a tight spot.
Is gazumping legal?
Gazumping is legal in England and Wales. While some don’t consider the practice ethical, there’s no law preventing sellers from taking a better offer. In Scotland, legislation has been introduced to make any agreement to the sale of the property binding, even a verbal one.
There have also been proposals to make gazumping illegal across the entire UK. The aim would be to make the selling process less stressful and more streamlined for all parties.
Is a gazunder offer legal?
The law around gazunder offers is the same as gazumping – the practice is legal in England and Wales but prohibited in Scotland. In Scotland, the legislation specifies that a buyer cannot reduce their offer for a property after a verbal agreement without good reason, and that good reason cannot be ‘solely a desire to reduce the price.’
What are the risks of a gazunder offer?
While gazumping is often frowned on, it carries little risk for the buyer doing the gazumping outside of potentially overpaying for a property. As long as the offer is for an amount they are happy to pay, the worst-case scenario is the seller choosing to stick with the original offer.
Gazundering can be much more risky at the buyer’s end. The most desirable outcome is securing the home you wanted at a discount, but you could also be left with no property at all. Not only could the seller decline your new offer in favour of remaining on the market or accepting an alternative offer, but they may have no choice.
If your purchase was part of a property chain, with the seller waiting to exchange contracts on another address, a low-ball offer could make the new property unaffordable. This ‘breaking the chain’ means the property might come off the market while the seller looks for a new home to offer on, and will certainly lose the trust of the seller and their agent.
Overall, the risk of making a gazunder offer leaves most buyers wary. You could save on your property, but with buyer demand up 11% in January the chance of losing out on your chance to buy entirely seems much more likely.
