What is Gazumping?
Gazumping occurs when a seller accepts an offer from one potential buyer but then sells the property to another buyer, usually for a higher price.
This can be a significant setback for the initial buyer, who may have already invested time, emotion, and money in the process.
Here’s how both buyers and real estate agents can navigate and prevent gazumping.
For Buyers: Protecting Yourself from Gazumping
1. Secure Financial Pre-Approval
Ensure your financing is in order before making an offer. Having a mortgage pre-approval not only strengthens your position as a serious buyer but also speeds up the process of moving from offer to contract exchange.
2. Act Quickly
Time is of the essence in property transactions. Work closely with your solicitor or conveyancer to review and sign contracts as quickly as possible. The less time there is between your offer being accepted and the exchange of contracts, the lower the risk of gazumping.
3. Build a Good Relationship with the Seller
Establishing a direct line of communication with the seller can sometimes offer a personal advantage. While not always possible, especially when agents are involved, showing your commitment and seriousness about the purchase can make a seller more likely to stick with you.
4. Consider a Lock-in Agreement
Some jurisdictions allow for lock-in agreements, where both the buyer and seller commit to not engaging with other parties for a set period for a fee. While not foolproof, it can provide a layer of protection against gazumping.
5. Insist on Transparency
Request that the property be removed from the market as soon as your offer is accepted. While not legally binding, it shows the seller’s intent to proceed with you.
For Real Estate Agents: Minimising Gazumping
1. Communicate Clearly
Ensure that both buyers and sellers understand the process and the risks involved. Clear communication can prevent misunderstandings and reduce the chances of gazumping.
2. Encourage Swift Action
Advise sellers on the benefits of quick contract exchanges. Highlight the financial and emotional costs of prolonged sales processes and the potential for deals to fall through.
3. Implement an Ethical Policy
While agents are legally required to present all offers to the seller, adopting a policy that discourages gazumping after a certain stage in negotiations can build trust and integrity in your agency.
4. Offer Guidance on Lock-in Agreements
If applicable, inform both buyers and sellers about the option of a lock-in agreement. This can be a useful tool in securing a commitment from both parties.
5. Utilise Technology
Employ CRM systems to manage offers and communications efficiently. This ensures that all parties are updated in real-time, reducing the window for gazumping.
Understanding Legal Aspects
It’s important for both buyers and agents to understand the legal context of gazumping in their area, as regulations can vary. For example, in Queensland, Australia, the practice is less common due to laws that shorten the period between accepting an offer and signing a contract.
Final Thoughts
While gazumping can never be entirely eradicated, understanding the process, knowing your rights, and taking proactive steps can significantly reduce its likelihood.
For buyers, being well-prepared and acting quickly are key. For real estate agents, clear communication and ethical practices go a long way in fostering a trustworthy marketplace.
Navigating the property market can be complex, but with the right strategies and understanding, buyers and agents can work together to achieve successful transactions.
