What is gazundering?
What you say after someone sneezes? It is rather a funny word that has a meaning that is anything but. Gazundering is an underhanded, unethical – but unfortunately not illegal – technique used by some quick house buyer companies. What is it, and how can you protect yourself as you navigate the sale of your home?
What is Gazundering?
A bit like a ‘bait and switch,’ gazundering involves extending an initial offer to a homeowner and then dropping the price after a sale has been agreed upon. For example, let’s say that a house buyer offers you £150,000 for your house. If you put it on the market with an estate agent, you may be able to get £200,000 – but you factor in the cost of agent fees, solicitor fees, repairs, renovations, valuations, staging, waiting etc., and decide it is more beneficial for you to accept this offer.
You have been promised a fast sale and you are looking forward to these funds in your account, so you accept the offer.
Then ‘all of a sudden’ the cash buyer informs you that for X, Y and Z reasons, they cannot possibly buy it for more than £110,000.
What Do You Do?
In many cases people accept the lower offer. They have already invested this time and effort into selling their house and working with this company. They do not want to go back to square one and start all over again.
Do not forget that many times people are in a vulnerable situation. They need to sell quickly to avoid repossession, to cover the cost of a down payment on a new house, to relocate, to pay for other expenses… The list goes on and on. And… because they are in this position, they agree to what is nearly half of what they could get on the market if they had the luxury of waiting.
Unscrupulous house buyer companies know this and engage gazundering as a strategic technique. They did not ‘all of a sudden’ realise that the property was worth less; they planned on changing their offer from the beginning. This is usually pre planned and pre orchestrated. By keeping you on the hook, so to speak, for weeks, they plan on you essentially being forced into the agreement.
Again, while completely and egregiously unethical, not to mention dirty, gazundering is not illegal. There aren’t any explicit laws protecting those who have been in this situation. Unfortunately they are left between the proverbial rock and a hard place.
So then it is up to us to protect ourselves. What can you do to avoid gazundering?
7 Steps to Avoid Being the Victim of Gazundering
In our book even if gazundering is not illegal, a house buyer who subjects homeowners to this situation is undoubtedly victimising them in a sense. When considering using a quick sale company:
- Research the House Buyer Thoroughly.
Put on your sleuth hat and do some investigating, starting with the buyer’s website. Is it professional, well designed and easy to navigate? Complete with contact details, including a physical address and working phone number? Does it contain company registration details? Is there clear information regarding their terms of business, procedures and code of ethics? Do they offer resources relating to the quick house sale process, FAQs and other relevant content?
- Look at Reviews. Thanks to the internet, we can search for reviews for virtually every product, service and company. Take the time to play Google Detective and see what your peers are saying about this house buying company. If the reviews are negative, it is a clear red flag – but be equally cautious about reviews that seem too good.
- Ask the Right Questions – and Demand Proof.
For example:
- How long have you been in business?
- Are you a member of The Property Ombudsman, The National Association of Property Buyers (NAPB), Royal Institute of Chartered Surveyors (RICS) and/or the Chartered Trading Standards Institute Consumer Approved Code scheme?
- What is your complaint process?
- Can I see proof of your financial status (make sure that buyers have the capital to invest in properties; unfortunately, some do not)?
- Can I have proof of recent purchases and the contact details for the sellers? Legitimate, reputable companies will be happy to provide this information to you. If they do not give it to you, walk away. If they do, follow up.
- Be Wary of Incomplete Valuations.
If the valuations carried out by the company seem less than comprehensive, be very sceptical in regards to proceeding. Without a proper valuation, they cannot extend a fair offer. They don’t care because they plan on dropping that offer down later.
- Do Not Jump On an Offer. Take your time to consider the offer; unethical buyers are counting on you to act out of desperation without taking the time to review the facts or the documents/reports related to the valuation of your house.
- Do Not Sign an Agreement. Signing an agreement or a contract with a house buying company is never a good sign. The language usually obligates you to use their services for a certain period (e.g. six to 12 months). You are stuck with them essentially. If they reduce their offer, they can prohibit you from selling with someone else.
- If It Sounds Too Good to Be True… It probably is. If an offer seems unexpectedly high, you may be tempted to count your blessings and then accept. Unfortunately it may be that you counted too soon. Offering a high price may be a signal that you will experience gazundering. This is another reason it’s important to know the value of your house before going into any sales situation.
When you choose a reputable company, you do not have to add gazundering to your list of concerns. Protect yourself and go with a house buyer with a sterling reputation, integrity and the capital you need for a quick sale.