While it may sound like something out of a Harry Potter book, you may be surprised to learn “gazumping” is actually a commonly used term in property conveyancing.
What is Gazumping?
Gazumping happens when a purchaser reaches a verbal agreement with a seller or agent to purchase a property at a certain price, and finds out afterwards the property has been mysteriously sold to another purchaser for a higher price. In this instance, our purchaser’s been gazumped.
Seems unfair doesn’t it? However, even after a verbal agreement, sellers’ agents are legally obliged to inform their sellers of any other offers received on a property until the contracts are exchanged. In fact, agents may find themselves in hot water if they don’t inform their sellers of subsequent offers.
At the end of the day, a sale is only binding once the contracts are exchanged. At any time before the exchange, an agent must inform their seller, and their seller may accept, any offer on the property.
To make matters worse for our gazumped would-be purchasers, sellers or their agents are not required to pay back purchasers for money spent on solicitors or conveyancers, inspection reports or financing applications and other conveyancing related services. Only an “expression of interest” payment is redeemable by the purchaser.
The NSW Fair Trading website has a number of tips for purchasers to avoid a dreaded gazumping:
- Pre-arrange your financing so there is no delay before an exchange
- Get a copy of the sale contract reviewed by a solicitor/conveyancer as soon as possible
- Exchange contracts with the seller as soon as possible
- Be prepared with your signed copy of the sale contract and follow through on the exchange itself
- Make sure the agent informs the seller of your offers
- If an agent tells you another offer’s been made, ask for it in writing (most agents will do this)
- Be prepared to increase your offer to the seller
If you would like to discuss anything raised in this blog post or any other issue surrounding the process of conveyancing or buying and selling property in NSW, please don’t hesitate to give us a call here at ClickLaw to discuss.