Understanding Gazumping and How to Protect Yourself
10th September 2024
Imagine finding your dream home, only to discover that someone else swooped in and snatched it away before you could seal the deal. In New South Wales, this frustrating scenario is known as gazumping, and it carries significant implications for both the purchaser and vendor. So, what exactly is gazumping, and how can you protect yourself from it?
What is Gazumping?
Gazumping occurs when a vendor accepts your offer verbally but then sells the property to someone else before the contracts are signed. This typically happens when another purchaser makes a higher offer. Despite this being frustrating, gazumping is legal in NSW, if contracts haven’t been exchanged.
Key Legal Changes in NSW
NSW introduced laws to address gazumping and improve transaction efficiency. These laws include:
- Vendor Disclosure: Vendors are now required to have a standard form of contract ready before marketing the property. This includes essential documents such as a planning certificate and drainage diagram, allowing purchasers to make informed decisions. However, this requirement does not apply to properties sold at auction or off-market transactions.
- Cooling Off Period: Purchasers have a 5-business-day cooling-off period (10 days for off-the-plan properties) to reconsider their decision. During this time, purchasers can withdraw from the contract and receive a refund of all but 0.25% of the purchase price.
- Waiver of Cooling Off: Vendors can require purchasers to waive their cooling-off rights through a Section 66W Certificate, making the contract unconditional from the moment of exchange.
How to Protect Yourself
To minimise the risk of gazumping, consider these tips:
Get Pre-Approved Finance
Having your loan pre-approved means you can act quickly when you find the right property. This helps in avoiding delays that could lead to gazumping.
Review the Contract Early
Obtain and review the contract as soon as possible with your conveyancer or solicitor. This ensures that you can move promptly to exchange contracts.
Exchange Contracts Quickly
Aim to exchange contracts and pay the deposit as soon as your offer is accepted. This binds both parties to the agreement.
Avoid Auctions
While gazumping cannot occur at auctions because contracts are signed immediately, there are other reasons to be cautious. Auctions can be high-pressure environments where prices escalate quickly, and you might end up paying more than anticipated. Additionally, there is no cooling-off period at auctions, meaning once you win, the deal is final and binding.
Ask for Exclusive Dealing
An exclusive dealing period is a timeframe negotiated with the vendor during which they agree not to entertain other offers. This can provide you with some protection against gazumping. However, it’s important to note that this period is not legally binding and does not guarantee that the vendor won’t consider higher offers. It simply gives you a window to complete the necessary steps to secure the property without the fear of competing offers.
Despite legislative improvements, gazumping can still occur, especially in a hot property market. The recent introduction of electronic conveyancing has sped up transactions, but purchasers should remain vigilant. For more details on protecting yourself from gazumping, visit NSW Fair Trading.
Navigating the property market can be challenging, especially with issues like gazumping. At Bangalow Conveyancing, our experienced team is here to provide you with the expert advice and support you need. From reviewing contracts to ensuring a smooth transaction, we’re dedicated to protecting your interests every step of the way.
Contact us today on 02 6687 0548 to learn how we can help you achieve a successful property purchase. If you found this post helpful, you might also enjoy our article on ‘Buying Property at Auction’ Discover more blog posts to enhance your property buying knowledge.
