KEY TAKE OUTS:
- What is gazumping?
- The impact of gazumping on buyers and sellers
- How to protect yourself against gazumping
In the competitive real estate market of New South Wales, prospective homebuyers often encounter a phenomenon known as gazumping. This practice can be frustrating and confusing for buyers, particularly first-time homebuyers who may not fully understand their rights and the implications involved.
What is Gazumping?
Gazumping occurs when a seller accepts an offer from a buyer but then later receives a higher offer from another buyer and decides to accept it instead. This typically happens before the sale has been finalized and can leave the initial buyer feeling frustrated and disappointed.
Why Does Gazumping Happen?
- Competitive Market: In hot property markets, sellers often receive multiple offers on their property, leading to bidding wars that can drive up the price.
- Lack of Legal Commitment: In NSW, until a contract is signed by both parties, either can withdraw from negotiations. This creates an environment where gazumping can thrive.
- Inadequate Time for Due Diligence: Buyers may feel pressured to make quick decisions, leading to situations where they are outbid shortly after making an offer.
The Impact of Gazumping on Buyers and Sellers
For Buyers:
- Emotional Toll: Losing out on a property after having your offer accepted can be emotionally taxing, especially if you’ve invested time and energy into the process.
- Financial Implications: Buyers may incur costs related to inspections, appraisals, or legal fees, even if they ultimately do not purchase the property.
- Market Anxiety: Gazumping can create a sense of urgency and anxiety in buyers, leading to rushed decisions that may not be in their best interests.
For Sellers:
- Reputation Risk: Sellers who engage in gazumping may face reputational damage, as buyers may be wary of negotiating with them in the future.
- Potential Legal Issues: While gazumping is not illegal in NSW, it can lead to disputes or claims from the original buyer if they feel misled or treated unfairly.
How to Protect Yourself Against Gazumping
For Buyers:
- Get Pre-Approved: Having mortgage pre-approval can strengthen your position and help you move quickly when you find a property you like.
- Make a Strong Offer: If you are serious about a property, consider making a competitive offer that reflects the current market value to reduce the chances of being gazumped.
- Act Quickly: If you receive a verbal acceptance from a seller, move swiftly to finalize the contract. The sooner the contract is signed, the less likely it is that the seller will entertain other offers.
- Consider a Cooling-Off Period: While this doesn’t prevent gazumping, understanding the cooling-off period can provide you with some breathing room after signing a contract.
For Sellers:
- Communicate Clearly: If you have accepted an offer, communicate that to all potential buyers to discourage further negotiations.
- Consider a Cooling-Off Period: As a seller, consider negotiating a short cooling-off period that protects you while allowing you to proceed with the sale confidently.
- Evaluate Offers Carefully: While higher offers may be tempting, consider the buyer’s ability to secure financing and their commitment to the property.
Conclusion
Gazumping can be a challenging aspect of buying and selling property in NSW, especially in a competitive market. Understanding the dynamics at play and taking proactive steps can help both buyers and sellers navigate this phenomenon more effectively. For buyers, being informed and prepared is key to minimizing the impact of gazumping. For sellers, maintaining clear communication and transparency can foster a more trustworthy selling environment.
In a market where every decision counts, staying informed is your best defence against gazumping and other challenges that may arise in your property journey.
ABOUT CHRISTINE BASSETT:
Christine is a Licensed Conveyancer and Justice of the Peace at Coutts’ Narellan office. Since joining Coutts Lawyers & Conveyancers in 2013, Christine quickly immersed her interest in the property and has since completed studies of Conveyancing Law and Practice at Macquarie University; and is accredited with the Australian Institute of Conveyancers NSW.
For further information please don’t hesitate to contact:
Christine Bassett
Licensed Conveyancer & JP
info@couttslegal.com.au
1300 268 887
Contact Coutts today.
This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.
