When purchasing real estate, nothing is legal and binding—even if you’ve already verbally agreed or shaken on a purchase price—until you’ve signed and exchanged contracts. As a buyer, you have to be very cautious about how you conduct yourself when expressing your interest to purchase a property and negotiating on a price. Otherwise, you risk opening yourself up to being ‘gazumped’ or overcharged.
What Exactly is Gazumping?
In general, a property sale would only be considered legal and binding once both parties have exchanged contracts. More specifically, this happens when the seller signs his or her copy of the contract of sale and the buyer does the same, and then both exchange contracts. Property solicitors in Townsville explain that when this happens, the buyer would then have to put down a deposit that usually amounts to 10% of purchase price.
Gazumping occurs when you, the buyer, verbally agreed on a purchase price with either the seller or agent, but then somebody else gets the property. This usually happens when the seller finds another buyer who negotiated a higher price or more favourable terms and conditions like a faster settlement for example, before exchanging contracts with you.
And although real estate agents are required by law to inform sellers of all offers on their property, before the exchanging of contracts, sellers have the right to negotiate with other potential purchasers.
So You Don’t Get the Property. Now, What?
Not getting the property should be the least of your worries because when you get gazumped, you won’t be reimbursed for all the money you spent for conveyancing, funding applications, inspections, legal fees, and other costs related to your intended purchase. You, however, do get to take back, in full, your deposit or payment for ‘expression of interest’.
The bottom line—if you’re not at the top of your game, aside from not getting the property, you’ll have likewise spent significant money that you won’t be able to take back. And you can’t really do anything about it since while gazumping is unethical, it’s not illegal in any way.