Nov 15, 2007

Should U.S. Buyers Worry About Gazumping and Gazundering?

As if homebuyers around the world didn't have enough to worry about, and enoughHouse in England vocabulary to learn: Those in the U.K. (especially, England, Ireland, and Wales), may encounter "gazumping," where the seller can accept another (better) offer at the last minute, even after having said yes to the original buyer's offer long ago; and "gazundering," where the buyer can wait until the last minute to say "I won't go through with the sale unless you lower the price."

(I'm not making this up! Here's an example from Ireland of overseas media coverage of this issue.) Like so many colorful words, gazumping and gazundering are reputedly of Yiddish origin.

And now, with Thanksgiving coming, let's all take a moment to give thanks to U.S. real estate laws. The reason gazumping and gazundering can happen in the U.K. is that the seller's acceptance of the buyer's offer is done orally, and doesn't make the deal legally binding. They wait to sign a written contract until the end of what we think of as the escrow or closing period - after they've performed all the usual tasks like examining the property and its title. That can take several weeks no matter where you live, during which time either party can pull out of the deal for any reason. Though they're expected to honor their oral deal, it obviously doesn't always work that way.

Here in the U.S., you normally sign the contract early on, but pack it with "contingencies," to give you an out - or grounds for renegotiation - if circumstances change as you prepare to close the deal. For example, if you're the buyer, you'll want to make sure your contract contains an inspection contingency, letting you pull out if you find that the house contains physical defects that you weren't originally aware of. The seller may also put contingencies into the contract -- for example, making the house sale conditional on finding another house to buy. We've said it before, but we'll say it again: Don't give up your chance to add self-protective contingencies to your contract!

Still, this look across the pond is a good reminder that, in any house sale, it ain't over till it's over. Sellers and buyers, ethically or not, may try to mold the agreement to their interests and pull last-minute surprises. Usually the surprises are minor, and easy to negotiate around (another reason to choose a real estate agent who's a good negotiator). But in case of major surprises, realize that even with a binding contract, you may need to make a trip to the courthouse to enforce your agreement.

To learn more about the escrow process here in the good ol' U.S. of A., read Nolo's Essential Guide to Buying Your First Home (Nolo), by the authors of this blog, or go to our good friend Sandy Gadow's website at www.escrowhelp.com.

Ilona Bray