How to deal with Gazumping and gazundering? Use an Auction
Gazumping and gazundering can make buying or selling a property significantly more stressful when the other party makes a sudden change before contracts are exchanged. This can mean buyers are right back to square one of their property search, and sellers are left unsure whether to accept a last-minute lower offer or start looking for a new buyer.
One of the best ways to avoid any potential for disruption and delays to your plans is to choose a property auction as a modern, fast, transparent alternative that ensures each party is fully committed and legally obligated to move forward.
Let’s explain the impacts of gazumping and gazundering, why they’re such huge issues within house sales, and how property auctions bypass these common problems to ensure everything runs smoothly for buyers and sellers.
Using a Property Auction to Avoid Gazumping and Gazundering
- Unfortunately, in private treaty sales, either party can change their mind, reduce their offer, or go with another buyer at any stage before contracts are exchanged, which creates a great deal of uncertainty.
- Finding yourself in a position where your sale or purchase cannot proceed or may possibly carry a different transaction value is undoubtedly frustrating, but there is little an agent, solicitor, or conveyancer can do because this is ultimately legal, if not always considered ethical.
- Buying or selling at auction removes any likelihood of either gazumping or gazundering because when the hammer falls, the agreement is legally binding, and there is no scope for either party to back out or change their offer.
Using a Property Auction to Avoid Gazumping and Gazundering
Firstly, what is Gazumping vs Gazundering?
It’s best to demonstrate this with some scenarios:
What is Gazumping?
Definition: When a seller accepts a higher offer from another buyer after already agreeing to sell to someone else, but before contracts are exchanged.
Example: You agree to buy a house for £300,000. A week later, someone else offers £310,000. The seller takes the higher offer and pulls out of your deal.
Who it affects: The buyer.
Why it happens: Often due to bidding wars, market conditions, or sellers wanting a better price.
What is Gazundering?
Definition: When a buyer reduces their offer at the last minute, just before contracts are exchanged.
Example: You've agreed to sell your home for £300,000. Right before exchanging contracts, the buyer drops their offer to £285,000 — hoping you'll accept to avoid delaying the sale.
Who it affects: The seller.
Why it happens: Sometimes due to falling property values, issues found in surveys, or buyers trying to force a discount under pressure.
Why Gazumping and Gazundering Cause Headaches for Property Buyers and Sellers
Most of us will have heard of gazumping, a challenging scenario in which a buyer makes an offer on a home they wish to buy, and the seller accepts it. In most cases, gazumping happens because the seller hasn’t taken the home off the market and receives a subsequent offer for a higher value.
Although an agreement exists and both parties were previously happy with the value offered, this doesn't become binding until the contracts are exchanged. The buyer could find themselves drastically out of pocket if they’ve paid for solicitors' fees and surveys, only to find the home they thought they were purchasing is now being sold to someone else.
Gazundering works the other way around and is just as disruptive for the seller.
In this situation, the parties have similarly agreed on a price for the house sale and are proceeding towards exchanging contracts.
The buyer then decides to reduce their offer, usually at the very last minute, putting pressure on the seller to settle for a lower value than had already been agreed upon or deal with the costs and stress of remarketing the property and looking for another buyer who is willing to offer somewhere close to the original amount.
In either circumstance, these practices are legal, and it’s common for the losing side to feel they have little choice but to up their offer or accept a lower value for fear of chains collapsing, losing out on everything invested thus far in the transaction, or starting the process of buying or selling all over again.
Here’s a quick summary outlining the consequence of Gazumping and Gazundering:
Uncertainty and stress due to deals not being legally binding until exchange
Wasted costs for buyers and sellers, including legal fees, surveys, and valuations
Risk of entire property chains collapsing if one party pulls out
Breakdown of trust between parties, making negotiations more difficult
Potential for unfair market manipulation (e.g. bidding wars or last-minute price drops)
Lack of legal protection in England and Wales compared to Scotland
Financing issues if a deal falls through, including lost mortgage offers or delayed approvals
Increased time and effort required to restart the buying or selling process
How Can a Property Auction Help Buyers and Sellers Avoid Snags and Issues?
Property auctions are exciting and fast-paced, and they attract a hugely diverse range of properties and buyers. Initial guide pricing is shown to give buyers a rough idea of what the auctioneer or the seller expects to make.
The big difference is that there isn’t any negotiation directly between the buyer and seller; the winning bid is final once the auction closes, and buyers benefit from transparency, seeing the bids rolling in and making independent decisions about whether they want to submit a higher offer.
From either perspective, the exchange of contracts that takes place right after the end of the auction removes uncertainty and ensures there is no potential that either party will side-step or decide that the questionable ethics of gazumping or gazundering are worth it for the financial advantage they might gain.
As a quick run-through:
Buyers pre-register to attend an upcoming auction, and sellers upload legal packs, images, video walk-throughs and particulars, often with open days or virtual viewings before the auction date.
On the day, buyers can enter bids as they wish. Provided any reserve price is met, the highest bid wins, and the contracts are exchanged immediately.
After the auction concludes, the winning buyer normally pays a 10% deposit there and then, which is part of the conditions of the auction.
The final balance is due within 20 days, at which point the sale is complete, and both buyer and seller can move forward with their respective plans.
Find out how much your property will sell for at auction.
Let us know the details of your property and we’ll provide you with our recommendations for the guide price and reserve price
Why Are Property Auctions Becoming a Popular Way to Buy or Sell a Home?
As we've seen, issues with gazumping and gazundering aren't only stressful but also have significant cost implications, and it is impossible for any buyer or seller to have 100% confidence that, however committed the other party appears to be, the transaction will go ahead as they expect.
Property auctions work differently and incorporate transparent, open bidding processes. This means there isn't any secrecy or tactical last-minute decision-making that could threaten the sale.
The benefits for both buyers and sellers include:
Complete transparency, with the highest bid displayed and without closed offers or the chance for a new buyer to make an alternative bid after the auction has ended.
The binding nature of the auction sale with all parties fully invested in buying or selling the property.
A lack of post-bidding negotiation, with competitive auctions designed to prompt prospective buyers to enter their highest bid to have the best chance of securing the property – without room for price adjustments after the fact.
Gazumping does not exist because a buyer knows they have won if their offer is the highest, and gazundering cannot occur since an auction sale is legally binding.
Coupled with greater speed and efficiency, a property auction is an appealing alternative and a scenario in which anybody buying a home or selling a property can do so with confidence from start to finish.
