Gazumping is one of the dreaded risks of buying a property, particularly when the market is heated. It is unfortunately still the “Law of the Jungle” when buying real estate in NSW, with the laws still well in favour of the vendor (the person selling the property).
Gazumping occurs when you have a verbal agreement with a sales agent or vendor to buy a property at an agreed price, but another buyer ends up exchanging contracts to buy the property. This usually happens when the vendor has decided to sell the property to someone else, usually for a higher amount than your initially accepted offer.
The sales agent is legally obliged to pass on to the vendor any further offers received for the property up until the exchange of contracts.
The main gazumping purchase scenarios are from pre-auction, post auction and private treaty sales.
If you are gazumped, neither the agent nor the vendor is obliged to compensate you for any money you may have spent on legal advice, inspection reports, finance application costs or other due diligence enquiries.
Gazumping can be heartbreaking. The excitement of believing your offer has been accepted can quickly give way to disappointment.
Here are some ways you can minimise the risks of being gazumped.
- Make sure your finance is unconditionally approved, and that you can access a deposit cheque for 10% deposit quickly
- Have the contract examined by a conveyancer or solicitor and that all changes are agreed upon by both parties
- Examine building and pest inspection reports, and/or strata inspection reports (for units)
- Check with council on nearby development applications that may affect the property you are seeking to purchase
- Have your solicitor forward you the signed 66W Certificate and attach to your signed contract, which waives your cooling off rights for un unconditional purchase
- Keep in regular contact with the sales agent until the contracts are exchanged
- Do not assume that if a sales agent says they have another buyer at a higher price that this is a tactic to get you to increase your offer. In this strong market most properties have strong buyer interest and competition, and you need to be prepared to react.
- Seek to ensure you exchange contracts as soon as you possibly can to reduce the risk of other parties having time to respond with higher offers. It’s best to exchange contracts with the sales agent at the time of presenting your signed contract, rather than leaving it with them and crossing your fingers.
- Use the expertise of a buyers agent to represent you in the process. We’re highly experienced in the processes and work only for you – the purchaser!