Legal? Yes. Ethical? No. Gazumping is a worry for everyone.
I’ve just started my home search and I’m really worried I’m going to get gazumped. It happened to my brother and sister-in-law and it broke their hearts – and they lost a bunch of money. How can I prevent this from happening to me?
– Worried House Hunter
So you’re worried about being gazumped – that’s understandable. You say that you’ve seen it happen before, and that it had a pretty negative impact on your family. This isn’t surprising – gazumping is maybe a house hunter’s worst nightmare.
For the uninitiated among us (read: lucky), gazumping is the term we use to describe a situation where the seller, who has already accepted an offer from a prospective buyer, decides to accept a higher offer from someone else.
In other words, if the seller backs out of the deal they previously agreed with you in favour of a higher offer from someone else, you’ve been gazumped.
Doesn’t that seem… kind of illegal? Well, it isn’t (but maybe it should be). Technically, sellers can back out until contracts have been exchanged – meaning just a few days before you complete, get your keys, and move in.
While it isn’t illegal, gazumping is widely considered unethical and can be a frustrating and heartbreaking experience for the original buyer.
This hurt is only compounded by any lost time and money spent on your transaction up to that point. Depending when in the purchase you get gazumped, you could lose money in fees you’d already paid for conveyancing. In the worst case scenario, you might need to find new accommodation while you look for and offer on a new property.
So what can you do to protect yourself?
There’s no surefire way to prevent gazumping. People are allowed to make higher offers, and sellers are allowed to accept them.
But there are a few things you can do to make it less likely.
- Ask the estate agent to remove the listing. Once your offer is accepted, ask the estate agent to remove the property from all platforms. This makes it less likely that another buyer will see the property and try to gazump you.
- Understand your buying budget. If there is another offer on the property, the seller’s estate agent will let you know and you should have an opportunity to make a counter offer. You should know your maximum budget and, if you’re comfortable doing so, you can choose to offer more money. But never offer more than you can afford – that’s just another way to have your heart broken.
- Sign a lock-in agreement. Sometimes your seller may be willing to enter into a good faith agreement that they won’t accept any other offers for a set period of time, usually a few weeks. This can give you some protection against being gazumped. But take note: these agreements are not legally binding, so it’s not a silver bullet.
- Act quickly. The longer your transaction takes, the more opportunities there are for someone else to make a higher offer. When your offer is accepted, apply for your mortgage and appoint a conveyancer right away. The sooner you exchange contracts, well – not only will you not get gazumped, you’ll have bought your home!
Ultimately – and I know this isn’t the answer you want to hear – sometimes, you get gazumped and there’s nothing you can do. If that happens, take some time to feel really crappy – then, get your head on straight and start again.
Hang in there. Homeownership is sweeter for how challenging the process can be. Right? Right??