What is a Gazunder
Gazunder is a colloquial term used in the United Kingdom when a real estate buyer lowers their offer despite already having agreed to pay a higher price. A gazunder typically happens when the market is weak and/or when the seller is coming from a position of weakness. "Gazundering" is not illegal, but many people consider it unethical. The seller may be forced to accept the lower price if it is a better option than continuing to pay the carrying costs on the property or continuing to hold it in a declining market. The opposite of a gazunder is a "gazump."
Breaking Down Gazunder
A gazunder offer (made by a "gazunderer") may be viewed as a bullying tactic by a buyer who is seeking to take advantage of a desperate or under-pressure seller. Gazundering may take place days before contracts are due to be exchanged or on the same day as a scheduled exchange. While gazundering may be seen as immoral or insulting, it is not illegal in the United Kingdom. The seller's recourse is to ignore the gazunder and risk the buyer walking away from the sale, to agree to the gazunder offer or try to negotiate it down, or to walk away entirely and start the sales process over again with a new buyer, potentially while the real estate market softens further. In such circumstances a gazundering buyer may have more leverage than a seller, as the seller may need to close the sale of their property in order to buy another property.
Despite the negative emotions that gazundering may cause, it is widely employed by buyers seeking to negotiate a lower price. Gazunder proponents take the position that while prices were rising, sellers were all too willing to accept higher offers from other buyers even after having agreed to a sale price. Since there is no law against gazundering, buyers should always employ the tactic to negotiate a lower price.
Gazunder vs. Gazump
In a related practice called gazumping, a seller coming from a position of strength will raise the sale price of a property above the price that was previously agreed upon when the transaction is already well under way. A seller may gazump if he thinks the buyer will remain committed to the purchase even at a higher price or if he has received competing bids and can fall back on another offer if the first buyer walks away. Gazundering and gazumping are not possible in the United States, since contracts formalizing a property's purchase price are signed at the beginning of the real estate transaction.
To successfully gazunder, buyers should make sure they have a backup plan in case a seller walks away from a deal. They should also only use agents or solicitors who are paid only when a deal is completed. Gazunderers should also not let on to any party that they may attempt to gazunder. To start the process, gazundering buyer should make an initial offer close to the seller's asking price. Then, as the contract signing day nears (the later the better, giving time for the seller to commit to buying their new property), the gazunder should choose a discount to ask for — 5% to 20% is not unusual.