What Does Gazumped Mean When Buying a Home?

How Gazumping Happens

Gazumping occurs when the seller accepts a buyer’s offer, often through a verbal offer or written offer, but later accepts a higher bid from another buyer. In NSW, a seller’s agent may continue receiving and presenting other offers before exchange of contracts, even after the seller accepts an earlier buyer’s offer in principle. For example, a buyer may offer $700,000 on a house and receive verbal confirmation that the offer has been accepted. While the buyer waits for their solicitor to review the contract, another person may make a counteroffer of $715,000, and the vendor may decide to accept the higher price.

Gazumping may also happen when the second buyer offers a larger deposit, a quicker exchange period or fewer conditions. This does not always mean the highest offer will be accepted, because the seller may consider the complete property transaction, including timing and certainty. For the original buyer, gazumping may be frustrating because they may have already paid legal fees, arranged building inspections, spoken with a broker and started preparing finance.

When A Property Sale Becomes Legally Binding

In a typical NSW property sale, the agreement generally becomes legally binding when both the buyer and seller have signed and exchanged the contract of sale. A verbal offer, written offer, text message or indication that the seller accepts an offer does not usually complete the NSW exchange process. The legal effect of any communication depends on the circumstances and should be checked with a solicitor or conveyancer.

The contract of sale sets out the purchase price, deposit, cooling off period, settlement date and any special conditions. A solicitor or conveyancer may provide general information about the legal effect of the contract before it is signed. This article is general information only and does not take into account your objectives, financial situation or needs. It is not personal financial, credit or legal advice. Readers may consider checking contract and gazumping questions with a solicitor or conveyancer.

Ways To Reduce the Risk of Being Gazumped

There is no certain way to avoid being gazumped, but being prepared may reduce delays. Some buyers may consider requesting the contract early, arranging legal review and making a written offer with clear conditions. Some buyers may consider asking whether other buyers are making offers, when the seller expects to exchange and what deposit may be required. A broker may explain what information lenders commonly request before assessing finance for a property purchase. Some buyers may consider shortening or waiving the cooling off period. This may involve legal and financial risks that should be discussed with a solicitor or conveyancer.

The Role of Finance Preparation

Finance preparation does not make an offer legally binding and does not prevent the seller from accepting higher offers. It may help a buyer estimate a possible budget, deposit and repayments before entering the property market, subject to lender assessment. A broker may review income, expenses, debts, savings and the proposed purchase price, then compare suitable options available through their lender panel. They may explain how a higher offer could affect the loan amount, estimated repayments, possible lender’s mortgage insurance and money required to complete the purchase. Loan pre-approval is conditional and does not guarantee final approval. The lender may still assess the property, verify the buyer’s circumstances and complete its usual checks.

Preparing To Make an Offer

Gazumping happens before the contract becomes binding and may leave a buyer without the property even after their offer has been accepted. Understanding the exchange process and having finance documents available may reduce some delays but cannot prevent gazumping or guarantee that an offer will be accepted. Eurobodalla Finance may discuss loan options from its lender panel, estimated repayments, possible deposit requirements and lender assessment steps. Options depend on the borrower’s circumstances and lender criteria.