EXPERTS have warned homebuyers to beware of a dramatic increase in the practice of gazumping as the Sydney real estate market picks up steam.
Gazumping – when a buyer has a verbal agreement with an agent or seller but loses the property to a higher offer – can occur after contracts are signed by the buyer and even after a deposit is taken.
“In hot markets you tend to see this a little bit more,” NSW Real Estate Institute CEO Tim McKibbin said.
“We have a shortage of property, competition is quite heavy and negotiations can take place after a deal is done in principle.”
Mr McKibbin said property buyers who wanted to protect themselves from gazumping should ensure contracts were signed as quickly as possible by both parties or go to an auction where “once the hammer falls the contract is made”.
“Unfortunately until you have a signed contract you don’t have much at all,” Mr McKibbin said. “What can happen is someone from both sides may find a better offer. And they’re entitled to.”
According to the NSW Department of Fair Trading: “In the case where a buyer is gazumped, neither the agent nor the vendor is obliged to compensate them for any money they may have spent on legal advice, inspection reports, finance application costs or inquiries.
“However, any ‘expression of interest’ payments such as deposits must be refunded in full.”
Positive Real Estate CEO Sam Saggers said Sydney property buyers should be especially wary.
“Gazumping is especially common in NSW where an expression of interest or a verbal offer do little to secure a property,” Mr Saggers said.
“The best way to ensure you secure a property is by exchanging a contract and paying a deposit as soon as possible.”
Gazumping is not illegal.