We frequently get asked by our foreign clients if gazundering and gazumping are both allowed in Spain. In this short blog post we’ll address both.
Gazundering
This is typically a strategy to lower the sales price moments before completing on a property before a notary. Unlike in other countries, such as the United Kingdom, gazundering is not legally possible in Spain.
This is because on buying property, whether off-plan or resale, you sign a contract with a seller which ‘locks you’ into a preagreed sales price. No changes are allowed in pricing following its signing. Should the buyer decide to pull this off at a notary, the seller can back out of the sale and pocket the buyer’s holding deposit. This is done to attain legal security for both parties.
Gazumping
This takes place when a second buyer offers a higher amount for a property after a seller accepted an offer from a first buyer. Admittedly yes, indeed it is possible. The problem is that most sales contracts in Spain are worded with penalty clauses (arras) which means the seller has a high price to pay if he attempts to pull out of the deal and sell the property to a third party. Typically, they would have to pay as penalty 10% of the property price. Naturally, this is only worthwhile pursuing for a seller if the second offer far outstrips the 10% penalty levied by the first buyer. A seller also needs to have cash available to pay the hefty freedom ticket.
In today’s market, a buyer’s market, it is difficult to see this happening. However, during a property boom, it is not uncommon, particularly for high-end property located in prime locations. Bailing out of a sales contract, and paying a penalty, makes perfect sense when you are receiving one, or more, higher-priced offers.