What is Gazumping?

Gazumping might sound like a made-up word, but in the world of real estate and property conveyancing you don’t want to be the victim of gazumping.

Gazumping. It sounds a bit like ‘glamping’ – a fun word for a fun activity! Sadly, not so much. The word ‘gazumping’ might put you in mind of bushwalks in your gumboots and sleeping under the stars, but the reality is far from a holiday. Broadly speaking, gazumping describes the process by which an offer is accepted but the property is then sold to a different buyer for a higher price.

Imagine a beautiful piece of chocolate cake that’s been sitting in your fridge waiting for you to come home. You’ve been thinking about it all day in anticipation. But when you get home, your partner got to it first and left you with nothing but the fruitcake that’s been sitting at the back of the fridge since last Christmas. Now imagine that feeling on a larger scale – a property-sized scale. That’s how it feels to be gazumped.

Find out what gazumping is and how you can protect yourself from potential gazumpers.

What is gazumping?

Gazumping happens when a buyer and a property vendor agree on a sale price by verbal agreement, but the property is then sold to someone else. Note that this can only happen when there have been no formal offers – just a word and a handshake.

Of course, when it comes to selling and buying property, there is a period when verbal agreements are all you have. Naturally, as a buyer, you will take the vendor at their word. Sadly, though, as no contract has yet been signed, there is an opportunity for someone else to come along and outbid you behind your back. Those sly buyers are known as gazumpers.

Before you go plotting revenge on the buyer who won the property in the end, you should know that gazumping is usually not the fault of the gazumper themselves, who may not be aware that your offer was verbally accepted. An agreement is only legally binding when signed contracts have been exchanged between each party.

Is gazumping legal?

While something of a grey area across Australia, gazumping is not actually an illegal practice. Queensland has taken steps to eradicate this practice by making formal written offers (once accepted) binding agreements. Anywhere else in Australia, the agreement will only stick once the sale contracts have been signed. Need help ask an expert team of Property Conveyancing Brisbane.

How does gazumping occur?

A real estate agent works in the best interests of the vendor, not the buyer. It’s their job, legally speaking. So, when a verbal agreement has been accepted, but there are no formal contracts in place, a real estate agent is still working on getting the vendor the best deal available. During the period between agreeing to a price and signing those documents, the property is still technically available for sale and will probably continue being advertised as ‘for sale’. From this point, gazumping can happen in two ways:

#1 The agent may still be working on getting a better deal.

Using your bid as the highest offer, an agent can still canvas the property, perhaps calling other interested parties to allow them to better your offer. It’s an underhand way of working but is within their rights to do until sale documents have been signed.

#2 The agent receives an unsolicited higher offer. 

Because the agent is bound to work in the vendor’s best interest, they will have to present any offers they receive. If the offer is higher than yours, the vendor will likely accept it.

What happens if I get gazumped?

Sadly, it means you’ve lost the property. Whether it was your dream home or an investment to add to your portfolio, getting gazumped is never nice. 

You will may also have lost out on some money. If you paid an expression of interest payment, the agent is legally required to repay that money. Sadly, they have no obligation to repay anything you’ve spent when you had the intention of buying the property. These costs could include property conveyancing fees, legal fees, inspection reports or financial application costs. 

When you have been gazumped, you could easily waste thousands of dollars and have no way of getting that back.

How can I avoid getting gazumped?

Unfortunately, there is not much you can do as a buyer to avoid getting gazumped. Until contracts have been signed (or, if you are buying in Queensland, until an offer has been formally accepted), there is always a risk of getting gazumped. Still, there are a few ways that you can help minimise the risk. Let’s explore them:

Involve your property conveyancer from the beginning

As soon as you can get your hands on the sale contract, get in touch with your property conveyancer for expert legal advice. They are there to advocate for you during the sale period and will look over the contract to draw your attention to anything you might need to know contact expert solicitors of Property Conveyancing Melbourne . They can also examine it to ensure the cooling-off period is in place and safe from guzumpers.

Get pre-approval on a loan

When your lender pre-approves your loan, you’ll have a much shorter wait time to get the funds. While this doesn’t guarantee you will be safe from someone outbidding you, it does give them a shorter timeframe to do so.

Have your deposit ready

When you make an offer, have your deposit ready to go. That way, you can be ready to hand it over as soon as possible, shortening the timeframe between your offer being verbally accepted and signing sale documents. Don’t give those gazumpers any extra time to swoop in!

Exchange contracts ASAP

This is the obvious one and not something you necessarily have a lot of control over except how long it takes you to act. When the agent invites you into the office to sign the documents – go as soon as possible! You see, when the documents are signed, the vendor can’t legally change their mind, whereas you still have the cooling-off period to rethink your decision. Just don’t forget; you will still have to pay 0.25% of the purchase price for changing your mind.

Ask to be notified of any other offers 

When you make an offer, you can ask the agent to tell you if any other bids come in, i.e. gazumping. This could allow you to outbid said gazumper if you want.

Don’t make an unreasonably low offer

You could get a great deal if a vendor accepts a low offer from you. However, you do run the risk of someone swooping in with a more reasonable offer and outbidding you. 

Buy at auction

You’ll never be in danger of gazumpers when you buy at auction. When an offer is accepted at auction, the buyer is bound to go ahead with it, even if someone makes a higher offer later. You, as the buyer, can pull out of the agreement, but you will lose more than 0.25% of the sale price – you’ll lose your entire deposit!

If you weren’t before, you’ll probably be worried about guzumpers now! But in reality, gazumping is not a common practice. And while you don’t have any control over the offers made on your dream home, you can take steps to shorten the time between making an offer and signing the contracts. Have your deposit ready, sign as soon as you can and always have a property conveyancer look over the sale documents as soon as you have them in hand. Are you in need of a good conveyancer to help keep away the gazumpers? Click here for more information about Jim’s Property Conveyancing in Melbourne, or here for information about Jim’s Property Conveyancing in Brisbane. Or for expert advice on property conveyancing services in Australia, please contact our friendly and experienced staff on 13 15 46.