However, you later receive a call from the real estate agent who says that the owner has accepted a higher offer from another buyer.
You have been gazumped, which is when you have an agreement with an agent or seller to buy a property at particular price. But before the contracts are exchanged, the vendor decides to sell the property to a buyer who has offered a higher price.
Gazumping is not an illegal practice and the agent is legally obligated to pass on any additional offers on a property to the vendor up until the exchange of contracts. Similarly, sellers are allowed to change their minds and accept an offer from another purchaser.
For a buyer, it is distressing and upsetting to miss out on a dream home and have to start the process from scratch.
However, there are several ways buyers can protect themselves from gazumping.
1. Have your finances ready
In the property buying process, having your finances ready will hold you in good stead. Make sure you’ve seen your mortgage broker to obtain a loan pre-approval and that you have funds available for a 10% deposit.
2. Seek the services of a conveyancer or solicitor
It is important to engage the services of a conveyancer or solicitor to take care of the legal side of buying a home. As soon as your offer is accepted, have your conveyancer or solicitor look over the contract of sale and negotiate any terms and conditions on your behalf.
3. Exchange contracts as soon as possible
By exchanging contracts as soon as you can, you will avoid missing out on the property and have it taken off the market. As soon as contracts are exchanged, there is a five-day cooling off period in which you can carry out pest and building inspections to ensure there are no issues with the property.
4. Buying at auction
A sure way to avoid being gazumped is to buy at auction. Under this method, the purchaser who makes the highest bid is bound to buy the property.
5. Be prepared
As a buyer, you should keep in mind that until contracts are exchanged, a vendor is under no obligation to sell to you and they have the freedom to change their mind. If you are serious about buying a property, be prepared to increase your offer to the vendor. On the other hand, be prepared to walk away if the price is outside your budget.