House Prices Falling So Fast Gazundering No Longer Unethical

[Realistbear]

http://uk.biz.yahoo.com/02102008/404/explo...-advantage.html

....../

the offer

Say you make an offer on a £200,000 property for £190,000 and that offer is accepted. Your seller is in a chain and is holding up the sale, possibly through no fault of their own. In the meantime average property prices in your area are falling, perhaps significantly.

Are you justified in gazundering, where you tell the seller further down the line that you are reducing the offer they initially accepted? They may have declined other offers or taken the property off the market and have no choice but to accept your lower offer in order to stop their chain collapsing.

According to a recent Fool.co.uk survey of 1,240 people, 58% of Fools think gazundering is unethical yet, if pushed, 94% would still force the price of a house down at the last minute.

I believe that as a buyer you are justified in gazundering in some cases. For example, if the survey has uncovered a problem, I think it is only right you should be able to renegotiate the price.

If local property prices have fallen significantly, and you have evidence of this, I also think you are justified in reducing your offer by the same proportion

, but only if there has been an unreasonable delay.

These arguments have been debated at length by my Foolish friend and colleague Donna Werbner, and it's clear from the message boards that many people are passionate and the rights and wrongs of gazundering.

At the end of the day, whether or not you agree with the practice of

gazundering, it is not illegal and it is certainly coming back into fashion

.

PS. I think the question of whether or not it is ethical is one that can only be answered on a personal basis. I don't think I would be comfortable doing it... but never say never.

If I was foolish enough to be buying this early in the crash I suppose it makes sense to keep up with falling prices, especially if the house you are considering is dropping at the rate of £1,000.00p every week.

[Slumpmonkey Returns]

Why is the press so fixated on the "ethicacy" of guzundering? I don't remember them ever questioning the rights and wrongs of guzumping on the way up!

[KevinTheGerbil]

If I was foolish enough to be buying this early in the crash I suppose it makes sense to keep up with falling prices, especially if the house you are considering is dropping at the rate of £1,000.00p every week.

Great article, thanks.

I dropped into a local EA last week to enquire about the 'market' (what market?)

Got the usual BS from the EA.... 'prices holding up well in this area', 'great time to buy' etc.

I stated would not be interested unless 25% came off the asking price - as I wanted to protect myself from future price falls. I'd rather get the sale price correct at the outset instead of having to re-negotiate price downwards later on in the transaction.

The EA then actually agreed with me..... I think reality might be sinking in with EAs. It's the vendors that need to wise up.

Edited October 5, 2008 by KevinTheGerbil

[Peter Hun]

Why is the press so fixated on the "ethicacy" of guzundering? I don't remember them ever questioning the rights and wrongs of guzumping on the way up!

Is it ethical to make money on a house sale or purchase?

Either one or the other will be making a profit out of the transaction, the other, a loss (at some point in the future).

This is the whole basis of the property speculative bubble, morals don't come into it because neither side has any.

[Fully Detached]

This is the whole basis of the property speculative bubble, morals don't come into it because neither side has any.

That's what makes it a market. Which a lot of people are about to learn the hard way.

[porca misèria]

This is the whole basis of the property speculative bubble, morals don't come into it because neither side has any.

Morals come in to honouring an agreement you've made.

I recollect back as a child, when the family moved house, we'd have surveyors reports that pointed out (perfectly obvious) defects in a house, and recommend a reduction in the agreed price in consideration of those defects. I think I recollect something over £3K recommended on a £20K sale price. Nothing new there.

As for delays, why not just make the original offer subject to completion by [date], with review or even abandonment if that doesn't happen due to vendor's chain? That sounds to me like honest gazundering.

[mattyboy1973]

Why is the press so fixated on the "ethicacy" of guzundering? I don't remember them ever questioning the rights and wrongs of guzumping on the way up!

I do.

Its not about house prices, its about making an agreement and sticking to it. If you don't think its worth the money, don't make the offer, its simple. Gazundering is about exploiting the shoddy UK house buying process to effectively blackmail someone. And no I have never been affected by it but the (lack of) principle of it bothers me, and that goes for gazumping too.

[Guest Steve Cook]

http://uk.biz.yahoo.com/02102008/404/explo...-advantage.html

....../

the offer

Say you make an offer on a £200,000 property for £190,000 and that offer is accepted. Your seller is in a chain and is holding up the sale, possibly through no fault of their own. In the meantime average property prices in your area are falling, perhaps significantly.

Are you justified in gazundering, where you tell the seller further down the line that you are reducing the offer they initially accepted? They may have declined other offers or taken the property off the market and have no choice but to accept your lower offer in order to stop their chain collapsing.

According to a recent Fool.co.uk survey of 1,240 people, 58% of Fools think gazundering is unethical yet, if pushed, 94% would still force the price of a house down at the last minute.

I believe that as a buyer you are justified in gazundering in some cases. For example, if the survey has uncovered a problem, I think it is only right you should be able to renegotiate the price.

If local property prices have fallen significantly, and you have evidence of this, I also think you are justified in reducing your offer by the same proportion

, but only if there has been an unreasonable delay.

These arguments have been debated at length by my Foolish friend and colleague Donna Werbner, and it's clear from the message boards that many people are passionate and the rights and wrongs of gazundering.

At the end of the day, whether or not you agree with the practice of

gazundering, it is not illegal and it is certainly coming back into fashion

.

PS. I think the question of whether or not it is ethical is one that can only be answered on a personal basis. I don't think I would be comfortable doing it... but never say never.

If I was foolish enough to be buying this early in the crash I suppose it makes sense to keep up with falling prices, especially if the house you are considering is dropping at the rate of £1,000.00p every week.

There is nothing unethical about gazundering.

Where ethics comes into play is when there is evidence of overt and demonstrable dishonesty or where there is clear breach of contract

Gazundering is pretty ruthless.

However, it is neither dishonest, nor is it in breach of contract

Edited October 6, 2008 by Steve Cook

[symo]

It's a shame that we can't get a Declan Curry comment on this. Probably something along the lines of

"Well what you have to remember it's the UK housing market, and prices only ever go up".

[Molly]

On the other hand, when things were booming!

I put an offer on a house, it was excepted, I paid for a survey etc, then the vendors decided to take it off the market and put it back on for 25k more!!!

Then again they did me a favor, 2 years later they still haven't sold, and I was saved and happily in rented, thats Karma.........

[PotNoodle]

The contract is only "enacted" on exchange of contracts.

Up till then, either party can cease negotiations or alter

the negotiated details, without detriment.

If the buyer has worded their offer in such a way as not to make

a firm, unretractable promise, then there is nothing to prevent

them changing the parameters of their offer to adjust to present

market conditions.

If they have verbally made a promise, however, then it is

distasteful (but not illegal) if they alter their promised offer.

I would personally, in the future, be careful how I worded things

before exchanging contracts and in the past I have regretted

not putting everything in writing as an Estate Agent once

embarrassed me by mis-representing my withdrawal from

a purchase because of structural problems.

[nixy]

I do.

Its not about house prices, its about making an agreement and sticking to it. If you don't think its worth the money, don't make the offer, its simple. Gazundering is about exploiting the shoddy UK house buying process to effectively blackmail someone. And no I have never been affected by it but the (lack of) principle of it bothers me, and that goes for gazumping too.

Yes, but this whole business is about regulation (or lack of). People do what they do within the regulatory framework that prevails.

If there are no rules, then those who rely on priciple will loose out. Those without principle will win.

This is no different to the banking system. Unprincipled banks have forced to keep their share price higher than their competitors by pushing the rules to the limit...... and thanks to Gordon Browns FSA (funded by the banks!) there were no limits.

When one bank starts pushing LIAR LOANS the share price would almost certainly rise. Its competitors would fall behind unless they adopt similar tactics.

No?

[Quoth]

I do.

Its not about house prices, its about making an agreement and sticking to it. If you don't think its worth the money, don't make the offer, its simple. Gazundering is about exploiting the shoddy UK house buying process to effectively blackmail someone. And no I have never been affected by it but the (lack of) principle of it bothers me, and that goes for gazumping too.

I agree - honouring your word and all that.

I prefer to make an offer that I'm prepared to follow through. However, this does place you at a disadvantage when opposed by those who are prepared to make a teaser offer to agree a sale and then pull the rug at the last minute.

My 25% off offer of last week was labled a total waste of time by the estate agent! And there I was thinking they would be keen just to have someone show an interest in the current market!

Regards,

Q

Edited October 6, 2008 by Quoth

[nixy]

My 25% off offer of last week was labled a total waste of time by the estate agent! And there I was thinking they would be keen just to have someone show an interest in the current market!

Regards,

Q

So, was the 'waste of time offer' actually submitted to the vendor??

as the EA is obliged?

Surely it is for the vendor to decide if the offer is not acceptable?

Perhaps the EA knows what the vendor is thinking at all times.... without even asking?

[Lepista]

Yes, but this whole business is about regulation (or lack of). People do what they do within the regulatory framework that prevails.

If there are no rules, then those who rely on priciple will loose out. Those without principle will win.

This is no different to the banking system. Unprincipled banks have forced to keep their share price higher than their competitors by pushing the rules to the limit...... and thanks to Gordon Browns FSA (funded by the banks!) there were no limits.

When one bank starts pushing LIAR LOANS the share price would almost certainly rise. Its competitors would fall behind unless they adopt similar tactics.

No?

http://www.loseloose.com/

[kingsgate]

The point where you exchange contracts is when you make a commitment to buy at a given price, not before.

Why people don't like this, I don't know. It seems to be perfectly sensible - up until exchange, you haven't legally committed to anything.

[Quoth]

So, was the 'waste of time offer' actually submitted to the vendor??

as the EA is obliged?

Surely it is for the vendor to decide if the offer is not acceptable?

Perhaps the EA knows what the vendor is thinking at all times.... without even asking?

Apparently it was but you can never know for sure.

The property in question is a textbook example of chasing the market down. It has been on the market a while before the whole "credit crunch" broke, has been 'sold' a number of times and is currently being marketed at nearly 30% less that it was originally.

Give it some time and my waste of an offer will seem reasonable as I'm sure some of the 'stupid' offers did 12 months plus ago did.

Q

[Alfie Moon]

If someone makes an offer on a property , say -20% of asking price, and the vendors accept but 4 or 5 months down the line exchange of contracts has not occurred and prices, generally, have fallen another -10% or so - is it moral to hold the person to honour their offer in that context? Surely it would be immoral to deny the person that made the offer their legal (and moral?) right to withdraw their offer because they can get much better value for their money elsewhere. They may, however, say to the vendor that they will continue with the purchase if the agreed price is lowered by -10% to reflect current market conditions. It is then up to the vendor to accept or reject.

The morality of the situation is also balanced by the vendor having the right to withdraw from the transaction at any point up to the exchange of contracts.

The situation either way is about a balance of morals rather than one way or the other, gazumping/non-gazumping, being the moral way and the other not.

You can buy anti-gazumping and anti-gazundering agreements. How much legal water they hold is another matter however.

[Alfie Moon]

I agree - honouring your word and all that.

I prefer to make an offer that I'm prepared to follow through. However, this does place you at a disadvantage when opposed by those who are prepared to make a teaser offer to agree a sale and then pull the rug at the last minute.

My 25% off offer of last week was labled a total waste of time by the estate agent! And there I was thinking they would be keen just to have someone show an interest in the current market!

Regards,

Q

In relation to the estate agent calling your -25% offer a waste of time - yep, there are many inexperienced Estate Agents out there that are full set on putting themselves out of business. They seem to lack any knowledge or skills as to how to operate in a falling market and are deluded enough to think that by pushing away potential buyers they can control the market and get prices either stabilised or rising again. Clearly they have no understanding of the market and don't realise how ignorent and stupid they are being. I pity the vendors on their books - theyt have got no chance of selling with Estate Agents like that representing their interests. Cutting their nose off to spite their face is a phrase that comes to mind.

[The Colour]

On the other hand, when things were booming!

I put an offer on a house, it was excepted, I paid for a survey etc, then the vendors decided to take it off the market and put it back on for 25k more!!!

Then again they did me a favor, 2 years later they still haven't sold, and I was saved and happily in rented, thats Karma.........

Delicious! The thought that the selfish idiots shot themselves in the foot.

[bagsos]

Someone tried to gazunder me when I sold my first house in 96. Told him to p*** off, and phoned the other people who were interested and told them I would accept their offer (£250 less than the reduced offer but so what), provided they could complete in 2 weeks (they could). The gazunderer then had the brass neck to call me and say that I was morally obliged to reimburse his survey and legals! When I pointed out that he was morally obliged to meet the difference between the offer he originally made and that which I eventually accepted he hung up.

[The Colour]

I wonder if a gazundering at a lower link could get passed on all the way up the chain?

[blankster]

I agree that the market's falling so fast that gazundering might become 'accepatable'. Perhaps people should make offer 'subject to changing market conditions'.

That would cover gazundering.

Edited October 6, 2008 by blankster

[Quoth]

In relation to the estate agent calling your -25% offer a waste of time - yep, there are many inexperienced Estate Agents out there that are full set on putting themselves out of business. They seem to lack any knowledge or skills as to how to operate in a falling market and are deluded enough to think that by pushing away potential buyers they can control the market and get prices either stabilised or rising again. Clearly they have no understanding of the market and don't realise how ignorent and stupid they are being. I pity the vendors on their books - theyt have got no chance of selling with Estate Agents like that representing their interests. Cutting their nose off to spite their face is a phrase that comes to mind.

The current decline is really going to sort the men from the boys. I think the office in question is already operating on a skeleton staff. We did increase our initial offer slightly but never got the courtesy of a response which kind of makes you think "well stuff you too!"

They probably are doing their clients a bit of a dis-service because in this instance they said the sellers don't have to sell as they have already bought their next place. I presume they want this to read "well, they don't need to accept low offers". I'm sure most would read it as "well, they have bags of cash so they can accept low offers!".

Regards,

Q

[Alfie Moon]

Someone tried to gazunder me when I sold my first house in 96. Told him to p*** off, and phoned the other people who were interested and told them I would accept their offer (£250 less than the reduced offer but so what), provided they could complete in 2 weeks (they could). The gazunderer then had the brass neck to call me and say that I was morally obliged to reimburse his survey and legals! When I pointed out that he was morally obliged to meet the difference between the offer he originally made and that which I eventually accepted he hung up.

In the context of hardly any transactions occurring in the property market (e.g. 1200 transactions in England and Wales in August) the chances of being gazumped are virtually zero. If an Estate Agent/vendor tried a gazump move on me I would inform them that if the gazump is not successful and they want me back in the deal/transaction then my offer will be another -7% off the asking price - i.e. it will be very costly for them. I did this many, many years ago and not surprisingly the threat of a gazump disappeared very, very quickly.