Buying a home
What is gazumping and how can you avoid it?
28 March 2022
There’s nothing quite as competitive as the property market. Getting an advantage over other buyers can be key to a successful purchase. This is where gazumping comes in – a practice that’s been around for as long as we’ve been bartering with each other.
How does gazumping work?
‘Gazumping’ describes when a real estate agent or seller informally accepts your offer on a property, but then goes ahead and sells it to someone else, usually for a higher price.
It can be tricky to lay the blame on anyone for gazumping. A real estate agent is generally obliged to pass on any new offers to a seller before the contract of sale has been finalised. Meanwhile, you can’t blame sellers for accepting higher bids if they’re allowed to do so, right?
Is gazumping legal?
Across the country, if an offer is made on a property prior to auction, both the buyer and seller can agree on the purchase. However, until both parties exchange signed contracts of sale, the seller retains their right to accept higher offers.
Property agents are also generally obliged to inform sellers of higher bids. There’s a fine line between being ‘gazumped’ and simply having some competition when you put in an offer. This is why gazumping is legal in Australia.
How Queensland has stamped out gazumping
Queensland is one of the few states to reduce gazumping in real estate. This is because when a potential buyer in Queensland makes a written offer to a seller’s agent, and that seller is happy with the offer, the seller’s agent provides the buyer with a contract of sale to sign.
Once both the buyer and the seller have signed the contract and hold fully-signed copies, the property is considered sold under the legally binding contract. This reduces the amount of time between when an offer is made and when the contract of sale is signed.
In other states and territories, this period after an offer is made can drag on as the buyer finalises their finance before signing the contract of sale, allowing time for another buyer to come in with a higher price.
Brisbane buyers advocate, Joanna Boyd, has seen how gazumping has been curtailed in her state.
“At the moment most offers are presented in a multi-offer situation, therefore there is full transparency. Everything is on paper, including the purchase price and conditions of the offer.”
There are, however, other practices creeping in that Joanna is concerned about. One is the increasing number of pre-auction offers that are submitted within weeks or even days of a property coming onto market.
“I am seeing more agents encouraging buyers to present pre-auction offers,” says Joanna. “I wonder if this is sometimes used to assist the seller with setting their reserve price on auction day or at the very least if this is impacting the increasing prices that are being achieved under the fall of the hammer.”
Things you can do as a buyer to avoid being gazumped
While you may not be able to avoid having to negotiate your initial offer, there are some things you can do to ensure you don’t get outbid.
Organise home loan pre-approval
Putting in an offer on a property and then spending weeks trying to arrange a mortgage can leave you open to a more prepared bidder. Instead, ensure you have conditional pre-approval for a home loan. That will give you a good idea of your available budget so you can negotiate with confidence. Find out more about home loan pre-approval.
Make sure a conveyancer can immediately review the contract
Get in touch with a solicitor or conveyncer before you bid for a property. You’ll want them to be prepared to review any contracts as soon as possible, reducing the time for other bidders to gazump your offer.
Consider using a buyer’s agent
A buyer’s agent will likely have strong relationships with many real estate agents and will understand the bidding process. They rely on the relationships they build and their reputation, so will have their client’s interests (the buyer) at heart.
“We have a set process to follow,” says Joanna. “It’s my responsibility to educate my clients and explain to them the steps and processes of a property transaction here in Queensland.”
Organise inspections as soon as possible
If a seller is accepting private offers and you include a cooling-off period in your offer, you can use this time for pest and building inspections.
When purchasing an apartment or townhouse, you can often view recent body corporate meeting notes in a contract of sale. This helps you learn of any potential issues or faults with the building, including pest issues.
Talk to a home lending expert
A Suncorp Bank lending expert will take the time to understand your financial situation and answer your questions. They’ll give you a clear picture of what you can afford, and what financing could be right for you.
By helping you with pre-approval, a home lender can help set you up to buy your dream property, and all consultations with Suncorp Bank lending experts are 100% obligation-free.
- Everything you need to know about the First Home Owners Grant in your state
- What is pre-approval and when should I get it?
- A simple guide to home loan interest rates
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