John Stephenson, senior partner and head of residential property team at city firm Bircham Dyson Bell LLP, is warning house sellers to take a hard stance at the outset to stop the increasing trend to 'gazunder' - when the buyer offers a last-minute price drop prior to exchange of contracts.
"Gazundering is a perfectly legal practice, but one could debate the moral side of the argument for days. My advice to vendors is to take the hard line and advise the buyer at the outset of the process - in writing, that should they attempt to drop the price after the original price has been accepted, there will be an immediate removal of papers - the deal is off," said John Stephenson.
"It's a hard line, but it seems it's the best way to protect the vendor's interests in a property market where there are fewer houses for sale and bidding wars are more prevalent. The vendor usually accepts the highest initial bid, but can then be put in the difficult position of either accepting the new lower offer or losing the sale of the house altogether weeks into the process.
"At least if the vendor makes his feelings clear at the beginning of the process, there is less likelihood of complications further along the line. This position has been successful for a number of my clients, but it takes nerves of steel to stand by the decision in a difficult property market."
Under English law, the original agreed price is not definite until exchange of contracts. Up until that time, which is usually three to five weeks after the vendor accepts the offer for the property, both the vendor and the buyer can choose to cancel the sale. If the vendor takes a higher price from another buyer, this is known as gazumping, but if the buyer offers a lower price than the one originally agreed, the rather inelegant term used is gazundering.
"Ultimately, there is no legal way to stop gazundering, other than 'exclusivity agreements' with a forfeitable deposit should the buyer renege, but the likelihood of the buyer signing it is slim - my advice is simply vendor beware," concludes John Stephenson.
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