Typically isolated to states such as New South Wales and Victoria, gazumping is a phenomenon whereby the seller of a home accepts an offer from a buyer, only to sell it to someone else, usually for a higher amount.
This is possible due to the laws around home sales in those states, where an exchange of signed contracts between buyer and seller must occur for a sale to be binding. Where that exchange does not happen quickly, the window is open for gazumping to occur.
Realmark North Coastal Director and Licensee Jeanette Bates said the practice was legal in both states.
“The lag time between the exchange of contracts makes it possible for a seller to accept an offer from another buyer,” she said.
“In Western Australia, we do not have this system and believe it is much fairer to purchase property by our offer and acceptance system.
“Once both buyer and seller have accepted the offer in writing, it is binding.”
REIWA President Damian Collins said we were fortunate in WA to utilise a standardised form.
“Sometimes real estate agents will involve a settlement agent if there’s particular clauses that need to be attached or considered, but generally REIWA agents have access to all the industry standard contracts themselves,” he said.
“When you make an offer, most of the time the selling agent will say there is a need to write that up in the contract. The selling agent will then go and meet with the seller and get them to sign it, and once the seller has signed it, it’s a contract – there can still be conditions on the contract but the seller cannot just go and accept another offer, they’re bound by the terms of that contract.
“When the contract is signed by both parties, then it’s a done deal.”
Ms Bates said less formal verbal negotiations and acceptance of an offer would not be acceptable within the majority of real estate transactions.
“Up until the buyer’s offer is accepted in writing, the property is available to other buyers to make an offer,” she said. “The potential sale then becomes a competitive offer situation and it is up to the seller which offer they continue to negotiate on or accept. This is not gazumping.
“My advice is to make all offers in writing and to transact and negotiate quickly, particularly in a market that is extremely buoyant, which is what we are experiencing in Perth at the moment both in property sales and leasing.”
Mr Collins said there were some rare grey areas to the offer and acceptance process.
“For example, a buyer might place an offer and the selling agent might come back and say the seller wants more, and the buyer ups the offer,” he said. “The selling agent then says they think the buyer will take that, but before the selling agent is able to speak to the seller, someone could come along and provide a higher offer.
Another situation in which the process could begin to go astray is when a buyer attempts to pull out of the contractual agreement due to a change of heart.
“They don’t have that right,” Mr Collins said. “Even if it’s subject to finance, you have to apply for finance, you have to go through the process.
“You can’t just treat that as a cooling-off period and walk away from it.”