What is gazumping?
Gazumping occurs when you have a verbal agreement with an agent or seller to buy a property at an agreed price but the property is sold to someone else for a higher price or more attractive offer terms. Attractive offer terms could be things such as a shorter or longer settlement, more deposit, less special conditions such as no building and pest reports or finance clauses. There are many variables.
The seller is entitled to achieve the best price for the property and the agents job is to help them. Unfortunately, this could mean you the buyer lose out if the seller decides to offer the property to another purchaser. This is possible as until exchange of contracts there is usually no binding agreement between you and the seller.
If you are gazumped, neither the seller nor the agent is obliged to compensate you for any money you may have spent on building and pest reports, bank valuations, legal advice, council and other relevant searches and other enquiries.
How to avoid being gazumped and losing your money?
You could arrange for pre-purchase reports and enquiries to be conducted during the 5 day cooling off period after exchange/contracts are signed by all parties concerned. However, if you find something wrong or simply change your mind and decide not to proceed, you will be liable for .25% of purchase price as agreed by you and payable to eh seller. You will need to consider the potential costs before deciding to get your reports done.
Do agents have a choice in gazumping?
No. The agent is a mere representative of the seller and must convey all offers to the seller prior to a binding agreement being entered into by the buyer and the seller. However, in NSW if you have paid a deposit or expression of interest prior to exchange of contracts the agent Must inform you if another offer is received and give you the opportunity to increase your offer if you wish.
If you would like any further information about gazumping please ask for a full fact sheet on the matter or call me, Anthony Davis on 0407 720 884