Gazumping is a term used when the seller of a property accepts an offer from a second buyer, after having already accepted an offer. In this market we are experiencing now it becomes more common, much to the annoyance of many buyers. Gazumping is most common in New South Wales and Victoria. It cannot happen in Queensland or Western Australia where an offer is considered legal and binding.
While working with a client as a Buyers Agent, there are a few steps and procedures that can be put in place to offset the chance of being gazumped. Mainly it involves shortening the gap as much as possible between the offer being accepted and contracts being exchanged.
This month there was an interview in the Australian Financial Review with local agent Gary Brazenor from Byron Shire Real Estate. The journo from the AFR was interested in a recent story of the sale of a property in Main Arm Road Mullumbimby. The eventual buyer was a buyer from Sydney who purchased it sight unseen and gazumped the original full price offer. The original two-bedroom, mid-century cottage went for $840,000, which was over its original asking price.
As a follow-up Gary Brazenor, wrote about the sale in their newsletter and I am copying it here as it gives a good insight into gazumping from the point of view of the agent:
“Real estate agents are often blamed when buyers are gazumped. However, we must work within legal parameters and our obligation is always to the vendor.
At Byron Shire Real Estate our office policy is to allow a purchaser to have an opportunity to complete conditions in order to exchange contracts before conducting any further inspections. If however, a seller requests we go ahead with the inspection we are obliged to enable it.
Buyers who have previously inspected the property can also still make offers which the agent is legally obliged to present to the seller. In this intense market, an increasing number of buyers are also making offers sight unseen!
I was recently asked by a buyer to view a property that was under offer awaiting exchange of contracts. When I told the buyer we had an offer and acceptance he told me that “this means nothing” and that he should be able to view the property and present his offer. After clarifying the owner’s position and confirming they were comfortable to allow the current purchaser an opportunity to complete conditions in order to exchange contracts we did deny his inspection.
These decisions however are always my clients, not mine. My role is not to judge whether the owner is right or wrong but to provide all the information for them to make an informed decision, made with clarity and the gravity of the situation.
It can be a very difficult decision and a moral dilemma! I’ve had sellers who have made the decision to accept offers $5000 higher than their current offer and I have had sellers deny offers $100,000 plus higher.
As an agent, I have been the target of gazumped buyers’ anger many times as they believe it’s been my decision for the owner to accept the higher offer. Fortunately, I have big shoulders and I am resilient. No one can be successful in real estate without these qualities.
You will only be able to read the original Australian Financial Review article here if you have an AFR account.