Q: My friend recently tried to buy a property but got gazumped at the last moment. I’m also looking to buy and I wondered how gazumping works and if there is anything I can do to help prevent it from happening to me?
A: Guzumping is when your offer for a property has been verbally accepted, but the property isn’t sold to you.
This can happen for a few reasons, such as when another interested buyer comes in late with a higher offer, more favourable conditions like a shorter or longer settlement, or the seller changes their mind on what price they will accept.
Guzumping is most common in the large Eastern seaboard states of Victoria and New South Wales, and in hot property markets where there is less supply than demand, which creates competition. It can be hugely frustrating and upsetting because you think you have secured a property only to have it slip through their fingers.
While it doesn’t sound like a particularly above board practice, gazumping isn’t illegal in these states because a sale isn’t legally binding until contracts have been exchanged. You also can’t recoup from the vendor or real estate agent any money spent on legals or inspections, so it can be costly too.
A real estate agent also, by law, has to disclose all offers on a property to the seller, even if an offer has already been verbally accepted, so it is hard to prevent.
However there are some things you can do to help improve your chances of a successful property purchase.
In cities where private treaty sales are rare and auctions are strong, gazumping is a little known phenomenon because gazumping cannot happen in an auction situation.
Speed up the exchange of contracts
The faster you are able to exchange contracts, the less chance you have of being gazumped. You then typically have a five day cooling off period to get all your due diligence done, like building and pest inspection reports, strata searches, home loan approval and have the contract of sale reviewed by your conveyancer or solicitor. Know who you are going to use for these things and have them on standby. Or do your due diligence before you make your offer, including getting your finances approved before you go looking for a property.
Sign a 66W
Guzumping can happen when buying by private treaty with a cooling off period, so why not force the seller into auction conditions? Signing a 66W waives your right to a cooling off period and means you pay your deposit and exchange contracts when you make the offer. This can work well if you’ve done your due diligence and are 100% sure you want to go ahead with the purchase, but make sure you have gotten sound legal advice.
Ask for the property to be taken off the market
Some real estate agents will consider taking the property off the market once an offer has been accepted, especially if you are prepared to pay a fee or get your solicitor to draw up an exclusivity agreement. This is at your cost, but might help offer peace of mind.
Have your finances ready to go
Have you been gazumped, or done the guzumping? Tell us your experience in the comments!
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