When you're in the process of buying a property, you might have heard the term "gazumping" thrown around. Gazumping is a term used in the property market when a seller accepts a higher offer from another buyer after already accepting an offer from a potential buyer. This can be frustrating and disappointing for the buyer who has already made an offer and can lead to a lot of confusion and uncertainty in the buying process. But why does gazumping happen, and what can you do to prevent it from happening to you?
If you're looking to buy a property, it's essential to know what this term means and how it can affect your purchase. In this article, we'll break down what gazumping is, what causes it, and how to prevent it from happening.
What is gazumping?
Gazumping is a term used to describe a situation where a seller accepts a higher offer from another buyer after already accepting an offer from a potential buyer. This means that the original buyer, who has already made an offer, will lose out on the property to the buyer who made a higher offer.
Is gazumping legal?
In Australia, it is common for a buyer and seller to reach an agreement on the purchase of a property before it goes to auction. However, until both parties have exchanged signed contracts of sale, the seller has the right to accept higher offers.
Property agents are required to inform the seller of any higher bids, but it can be challenging to distinguish between healthy competition and being gazumped. Despite its potentially unfair nature, gazumping is legal in Australia.
What are the legal implications of gazumping?
Gazumping is not illegal, but it can be unethical. However, it can lead to legal implications if the original buyer has already paid for surveys, legal fees, and other expenses. In some cases, the original buyer may be able to sue the seller for breach of contract if they have already exchanged contracts.
Why does gazumping happen?
Gazumping can happen for several reasons. One reason is that the seller may receive a higher offer from another buyer, and they may be more willing to sell to the higher bidder. Another reason could be that the original buyer is taking too long to complete the purchase, and the seller may be losing patience and decide to accept a higher offer from another buyer.
How to prevent gazumping?
While gazumping can be frustrating, there are several ways to prevent it from happening. Here are some tips to keep in mind:
- Move quickly: The faster you can complete the purchase, the less likely the seller will consider other offers.
- Have all your finances in order: Ensure that you have your finances in order, and you can provide proof of funds to the seller.
- Make a higher offer: If you really want the property, consider making a higher offer than the asking price to deter other buyers.
- Get everything in writing: Make sure you have everything in writing, including the offer, so the seller can't accept a higher offer without your knowledge.
- Consider using a lockout agreement: A lockout agreement is a legally binding contract that prevents the seller from accepting any other offers for a set period, usually 28 days.
In conclusion, gazumping is a legal practice in Australia where a seller accepts a higher offer from another buyer after accepting a verbal offer from a buyer but before exchanging contracts. Although this practice can cause frustration for buyers, it is a common occurrence in the Australian property market. The legality of gazumping may seem unfair to buyers, but it is important to remember that until contracts are exchanged, the seller has the right to accept a higher offer.
Key takeaways from this article include:
- Gazumping is legal in Australia and not limited to any specific state or territory.
- Estate agents are required to inform the seller of any higher offers but may not disclose the highest offer to the buyer.
- To protect yourself from gazumping, it is recommended that you request a written contract as soon as possible and consider exchanging contracts quickly.
Speaking with a conveyancer can further protect your interests, so make sure you contact us today so you know where you stand.
While gazumping may be a frustrating and even upsetting experience, it is essential to remember that it is not illegal. Taking steps to protect yourself and seeking legal advice can help you navigate the property market with confidence.
What is Gazumping? - FAQs
Is gazumping illegal in Australia?
No, gazumping is legal in Australia.
What does gazumped mean in Australia?
In Australia, gazumping refers to the situation where a seller accepts a higher offer from another buyer after accepting a verbal offer from a buyer but before exchanging contracts.
Is gazumping illegal in NSW?
No, gazumping is legal in NSW.
Do estate agents like gazumping?
Estate agents are neutral towards gazumping as it is a common practice in Australia. However, it can cause frustration for buyers and tarnish an agent's reputation.
Do estate agents encourage gazumping?
Estate agents are not allowed to encourage gazumping or any other unethical practice. They are required to act in the best interest of their client and follow ethical standards.
Can you outbid an accepted offer?
Yes, you can outbid an accepted offer until contracts are exchanged. Until the contracts are exchanged, the seller can legally accept a higher offer.
Can estate agents tell you the highest offers?
Estate agents are required to inform the seller of any higher offers they receive. However, they are not obligated to disclose the highest offer to the buyer.
Is the estate agent lying about offers?
Estate agents are not allowed to lie about offers. They are required to act in good faith and follow ethical standards. If a buyer suspects that the agent is lying, they can ask for proof of the offer.
How do I protect myself from gazumping?
To protect yourself from gazumping, you can take the following steps:
- Request a written contract from the seller as soon as possible.
- Hire a solicitor or conveyancer to review the contract and provide legal advice.
- Consider exchanging contracts as soon as possible to avoid losing the property to another buyer.
- Is gazumping immoral?
- Opinions on the morality of gazumping vary. Some consider it to be an unfair practice, while others view it as a necessary part of the property buying process.
Can you accept 2 offers on a house?
No, a seller cannot legally accept two offers on a house. Once a seller has accepted an offer and exchanged contracts with the buyer, the property is considered sold.
