Even if you have paid a deposit and signed a contract and offered full price the property is still not yours until the seller has signed and the contracts are exchanged.

HOW CAN THIS BE? ISN’T GAZUMPING ILLEGAL? THIS ISN’T FAIR!
HOW CAN SOMEONE ELSE OFFER MORE OR BE SHOWN THE PROPERTY AFTER THE SELLER HAS AGREED TO SELL TO ME?

The Reasons:

1. Paying a deposit and agreeing to terms does not ensure you will purchase the property. All deposits are fully refundable right up to the point of exchange of contracts.

2. You only have a verbal contract up until exchange of contracts. The seller is under no legal obligation until the written contracts are exchanged. (The seller may be under a moral obligation but often this goes out the window when extra money is offered by a second buyer).

   “Exchanged” means the two signed identical contracts are swapped. You or your solicitor receives the sellers signed contract and the buyer or their solicitor are given your signed copy and the agreed deposit is paid.

3. All properties remain on the market for sale right up until the time that contracts are exchanged. This means that buyers who saw the property previously or had arranged inspections subsequent to your offer being made can still negotiate to purchase.

   UNLESS THE SELLER INSTRUCTS US TO CEASE INSPECTIONS THE PROPERTY WILL CONTINUE TO BE SHOWN TO PROSPECTIVE PURCHASERS.

   (Why? Because 15-20% of sales do not proceed to exchange of contracts and the seller can lose up to two weeks or more in marketing time if the property is taken off the market for an unsuccessful buyer).

4. The true definition of gazumping is when you are not told of another buyers offer and the property is literally sold out from under you by the owners, another agent or your own agent.

5. If you are told of another offer by another buyer you have not been “gazumped”. You are just in competition with another buyer and it is likely the seller will be tempted by the highest price offered. (Not always the way but experience has shown most sellers find it hard to resist the extra money).

6. If you are in competition with another buyer it is possible that you could get involved in what is referred to as a “Dutch Auction”. This is where each buyer simply offers a little more than the other buyer until one gives up. This is very stressful and frustrating for everyone.

Declaring Your Highest Buying Price
Our solution to this is to have each buyer sign a “Buyers Declaration” (which simply asks each buyer to confidentially state the highest price they are prepared to pay for the property with no comebacks if they are beaten *Hint- don’t have your offer end in three zeros if you sign a Buyers Declaration). The sellers will then decide which buyer they wish to sell to and that buyer will be invited to sign and exchange a contract almost immediately to secure the property.

BIG NOTE: If another offer is received on the property you are negotiating on you will be told immediately by our office. You will not be told what the other buyers offer is but you will be asked to state the highest price you are prepared to pay and you may be asked to sign a Buyers Declaration depending on the circumstances. You will not be “gazumped” but will simply be in competition with another buyer. Any deposit paid is fully refundable up until contracts are exchanged.

Our Advice

• Get organised. Pay a deposit quickly as a sign of “good faith”. Have finances organised and if possible, a loan pre-approval for the amount you are seeking if you are borrowing. Note: Although paying a deposit does not mean you have secured the property it does let the seller know you are a serious buyer.

• If you are paying full price for the property the chances of being “gazumped” are lessened. Even so in a heated market many sales occur above full price so paying full price does not necessarily guarantee success as a purchaser.

• Move as quickly as you can to sign your contract taking advantage of the 5 day cooling off period if you can (not always possible). You will risk ¼% of the purchase price (e.g. $625 on a $250,000 property or $1250 on a $500,000 purchase) but no one else can buy that property during the cooling off period. You actually secure exclusive purchase rights for a week or so. If you decide not to proceed before the cooling off period expires you forfeit the ¼ % deposit to the seller plus you still have to pay for any reports etc you commissioned.

• Understand how it all works. If you are like most buyers, you don’t buy a property every day so read up on and research the buying process. If you don’t understand something ask us to explain it – we understand that this is a stressful time and that for some buyers its a once in a lifetime transaction.

• Don’t blame the agent. Only the seller can decide who they wish to sell to and at what price they will sell for. Your agent will advise the seller of the pitfalls of having multiple buyers but does not make the final decision. Only the seller can do that and although not always morally right, they have every legal right to choose which buyer they wish to sell to. Human nature however dictates that its usually whoever offers the highest price gets the prize.

• GOOD LUCK. We are here to assist and advise. The N.S.W Conveyancing System is archaic in many ways but does permit agents to exchange contracts with very good cooling off provisions. The cooling off period allows purchasers to secure a property at minimal financial risk and have the following 5 full business days to organise pest and building reports, finance, surveys etc. and to take a copy of the signed contract to their solicitor. In many cases the cooling off period can be extended for a few days more if all approvals are not in place but this is at the sellers discretion.

PLEASE…….. DO NOT SHOOT THE MESSENGER. In a heated market it is very likely there will be several buyers for the limited number of properties available. Your agent can be of immense help and if you heed the advice above you will be well prepared as a purchaser.