How to avoid gazumping - one of real estate’s dirtiest tricks

Gazumping is a funny word for a serious problem in the real estate industry. It’s when a buyer makes an offer on a property that the seller accepts, but before any paperwork is signed, the seller backs out to take up a more attractive offer. 

In most of Australia, the sale of a property only becomes legally binding when both buyer and seller have exchanged signed written contracts. This means that as a buyer, you’re susceptible to gazumping right up until the time you sign your contract, and the offer goes unconditional.  

It’s a deeply frustrating experience. I was gazumped when I first started in the property industry, and the disappointment scarred me for a long time. 

I was flipping properties and had found my perfect next buy. I’d made an offer that was accepted, and just as I was getting ready to pop the champagne, the vendor backed out and sold the property to someone else. Their offer had come in way after mine.  

Not only was the already highly emotional experience of buying made even more emotional, but I’d also lost out on the chance to make an excellent investment. Plus, all of the money I’d spent on inspections, conveyancing and legal fees. 

How does gazumping happen?

It’s certainly not a new concept when it comes to buying and selling property. But, it’s a tactic being used more frequently by vendor agents while the property market favours the seller and demand is hot. 

With an offer in hand and no contract signed, agents take the time to shop the property around and entice buyers with the prospect of missing out. A real estate agent’s job is to get the best price for the property. So, until you’ve signed the contract, nothing stops them from going to a rival buyer to get a better price for their client. 

How can you avoid gazumping?

In many cases, it can be impossible to remove the threat of gazumping entirely, but there are things you can do to reduce the risk of disappointment.

1. Do your due diligence
   The chance of gazumping is increased the longer a vendor agent has between your offer and signing a contract. So, reducing that time as much as possible is your best bet. 

   Before you make an offer, make sure you’ve done your due diligence, so you’re in a position to exchange as soon as you’ve made your offer. Have a building and pest inspection done as quickly as possible.
   

2. Buy at Auction
   Buying a property in an auction environment is the only way to guarantee that you don’t get gazumped. That’s because there’s no cooling off period once the auctioneer bangs their gavel. The property goes to the highest bidder, and that’s it.

   Although, you should keep in mind that buying at auction can be very stressful, and often buyers pay more than they want to without professional help guiding them through the auction hype. 
   

3. Get pre-approval for your finance
   If a lender has already approved you for a loan, it means you’ll have a shorter wait to get your funds. This could reduce the time it takes to exchange contracts and allows less time for other buyers to snap up your dream home.

   But don’t forget, pre-approval doesn’t guarantee a lender will approve your loan when it comes time to apply, so there is a risk involved in moving too quickly. 
   

4. Work with a Buyer’s Agent

   Buyer’s Agents work with your best interests in mind every step of the way, unlike the vendor agent who’s looking to get the best price possible for the seller. 

   Not only will we advise on the best time to make an offer, but we’ve also got great relationships with agents in the industry and know their strategies. You can also count on us to help you navigate finance pre-approval and your due diligence quickly to reduce the time between offer and contract exchange. 

Buying real estate is a highly emotional process and being gazumped is one experience you should avoid at all costs. If you have any questions or want to know more about how we can help, please don’t hesitate to get in touch.