UK gazundering surge highlights stronger protections in Canadian real estate

A wave of last-minute price cuts by British buyers contrasts with binding-offer systems used in several Canadian provinces.

A surge in last-minute price cuts by buyers in the United Kingdom is drawing attention to differences in how Canadian real estate transactions are protected. In a weak housing market, buyers are demanding 11th-hour price reductions and financial professionals are the worst culprits, writes Chris Blackhurst.

The day before we were due to exchange contracts on the sale of our house, the estate agent called. He had bad news: our buyer wanted to lop £20,000 off the price. If we did not agree, the deal was off. The purchaser claimed we were asking too much. A couple of months had passed since their offer was accepted and since then, they said, values had fallen.

This was nonsense. Prices had remained steady. The agent said he had protested to no effect. We were the victims of gazundering. If it was any consolation, he was seeing it all the time. We could try and pass the reduction on to the people we were buying from. But that was not in our nature. We had no choice but to swallow hard and agree. The agent did say he would try to negotiate, to see if they could be more reasonable. He managed to get them to come down but we still had to take a substantial hit.

Our buyer was a City type. The most common sort, said our agent. Presumably this is what they do in their day job, agreeing a price then trimming it. Great result, well done.

Gazundering first became a thing 30-odd years ago, although the word is far older, referring to the chamber pot once kept under beds. Goes under, get it? It is the opposite of gazumping, in which someone nabs a property from a rival buyer by offering the seller more money after an offer has been agreed.

The word may be historic and the practice was first mentioned more than three decades ago, but it is now rampant. In a buyers' market, with very little moving, the buyer calls the shots and that includes reducing the price right at the very end. This, in the current market, when they may well have made an offer below the asking price and had that accepted. It is the second bite of the cake.

"Gazundering used to be seen as really bad form, but now I expect it to pop up on every deal," says Simon Nosworthy, head of residential conveyancing at London firm Osbornes Law. He told The Negotiator, the media platform for residential agents, that almost every residential property deal involved a last-minute attempt by the buyer to force a price cut. "The rise in gazundering has been nothing short of staggering," he says.

"A chronically weak property market has meant buyers are taking advantage to the point where trying to get money off at the last minute has become standard practice." Nosworthy adds: "It used to be that gazundering was seen as really bad form and an underhand tactic that most people wouldn't consider, but now I expect it to pop up on every deal. It seems to be that only people of absolute principle don't consider doing this. The attitude seems to be that if everybody else is doing it then why not me as well?"

Estimates vary as to its prevalence. One says a third of sellers are subjected to gazundering, or chipping as it is also known, with three-quarters of them capitulating and agreeing to a reduction. Nosworthy puts the figure much higher, at 90 per cent.

Often the buyer's excuse for cutting the price is dissatisfaction with concerns about damp, problems with the plumbing or faulty electrics. We apparently fell into the not-so-common category of having a buyer who did not even pretend to be worried about any of those. Ours simply said that is where they believed the market was and that was what they were going to pay. They knew they had got us where they wanted us. We were desperate to hang on to them and could not face losing our purchase and having to start over again.

It is only a problem in England, Wales and Northern Ireland, not in Scotland, where an offer once accepted is legally binding. From acceptance to exchange typically takes two months. Towards the end, especially in this market, the tension mounts. The nearer you get to the line, the more the pressure rises. One in three sales falls through before exchange. In Canada, several provinces use binding agreements at the offer stage, reducing the window for such tactics.

That is what the gazunderer is preying on. According to the Ministry of Housing, Local Government and Communities, these failed sales are costing sellers £400 million a year and the wider economy £1.5 billion. Sir Keir Starmer's government was pushing through reforms to bring down the time lag to four weeks, which it said would save the average first-time buyer £650.

Moves were under way to change the process in England, Wales and Northern Ireland and bring them more into line with Scotland. But those measures were not due to be passed until the end of the current parliament, in 2029. The Ministry for Housing, Communities and Local Government has said: "We're stopping gazundering by introducing legally binding agreements that prevent buyers from walking away at the last minute without a valid reason, with fines for those who do." Until then, it is perfectly legal. Distasteful, yes; against the law, no.

As we found to our cost, not everyone is disapproving. There is plenty of material on the internet, on social media, in forums, dedicated to achieving a successful gazunder. One site carries a page entitled "gazundering is your friend." The tactic, it proclaims, "is part of the game. If you don't play your gazunder card at the right time, you only hurt yourself." Those decrying it "are just trying to protect their own profits, so don't take them seriously. Sellers regularly ask for higher prices, so why shouldn't buyers exploit the market too?" It even included a checklist for the would-be gazunderer and advised that there was no need to be too bothered about the vendor, as they can pass the pain down the chain. We did not, and we were left out of pocket. Reading this material, it is clear that change has to happen, and quickly. Legislation for England, Wales and Northern Ireland cannot come soon enough.