What do people mean when they mention real estate gazunders or gazumps?

By Richard Wilson AAA
A:

A gazump refers to the practice of raising the real estate's price from what was already verbally agreed upon. This move is often executed just before the papers are to be signed, which irritates the buyer and complicates the deal. The seller uses competing bids to justify increasing the price and it often motivates the buyer to close on the deal so that the price does not rise any more. Gazumping is not illegal but it is generally considered an unethical practice in real estate.

The seller presumably expects that the buyer is already committed to purchasing the property to the degree that a last-minute gazump will not change the buyer's mind. A common way that a seller will gazump is by emphasizing a competing buyer - or even inventing the second buyer. The seller uses the threat of another interested buyer to push the original buyer into paying a higher price than the original agreement. If the first buyer does not agree to the increased price then the seller may simply dump that buyer and turns to the second buyer. The "gazumper" is thus manipulating price based on the buyer's desire to buy the real estate. A gazump can refer to other forms of cheating, but it is most commonly associated with real estate.

In real estate, a gazunder is the opposite practice in which a buyer will abruptly lower the offered price before the transaction is finalized. A gazunder typically occurs when the potential buyer has reason to suspect that the seller will probably lower the price to induce the buyer. There are a variety of reasons that the seller will lower the price such as time constraints in which the seller needs to finalize the transaction as soon as possible and will therefore accept losing some money or if the real estate market is sliding a seller often seeks to sell as soon as possible despite having to lower the price. The buyer would then gazunder for a lower price by offering a lower price than previously agreed to. This practice, like gazumping, is not illegal but is widely considered unethical.

For more information on buying or selling real estate, check out our article on Investing In Real Estate.

This question was answered by Richard Wilson.

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