The Money Pit. A dark legend in the world of real estate, the monster in the closet, the secret fear of all investors.Why do we do it?Why do we pour time and money, blood, sweat and tears, into a
Will you be overcharged, swindled or Gazumped?
What is Gazumping?
Just what is gazumping, and how do you make sure that it does not get the best of you? The term gazumping is said to have come from the Yiddish word “gazumph” which means to swindle or overcharge. During the 1920s, it supposedly came in to frequent use in the gangster culture, when people would use the word when making false transactions to con someone in to upping their price. Over time, the meaning has changed slightly, and the word now applies primarily to real estate. Gazumping is when a vendor accepts a higher offer from another buyer after one has already been accepted.
If you have never purchased a home before, this may seem very unfair to you, and you may not understand how this happens. When a buyer puts in a bid on a house and the vendor accepts it that is only the beginning. An agent, which is a go between for the buyer and the vendor is still obligated to tell the vendor of any bids that go in on the property until the close of the sale. So, even when there has been an agreement made, until the contracts are signed, the property is still up for grabs. This is good for the vendor, because they can still accept higher offers. Even if the house has been taken off of the market, until contracts are signed, parties who have previously viewed the property can still put a bid in on the real estate. If this happens, the agent is legally obligated to inform the seller of such activity. This is to protect the seller’s best interest.
For the most part, agents do not want there to be another offer. Once an agreement is made, it is in their best interest for the proceedings to happen as quickly as possible. A slightly higher bid will not necessarily mean much more in commission for them, but it will mean a lot more work in deliberations and paperwork. So, many agents will ask sellers to sign an agreement that says that gazumping will not be a problem.
As a buyer, it is in your best interest to ensure that your funds do not get tied up in legal proceedings for a property that you may not end up with in the end. Ask your agent about the prospects of gazumping, and whether or not they have a contract with the seller that prevents such activity. This will lead to a less stressful proceeding for all parties involved. Buying a home for the first time can be a scary and exciting process. Obviously, you want it to be more exciting than scary, so cutting out as many surprises as possible is paramount.
Once you put in a bid on a property and it is accepted, your money begins to be spent. Inspections, feasibility studies, appraisals and court fees are non-refundable. So, in order to ensure that this money is not being spent in vain, do everything you can to make sure that you understand where your agent stands on gazumping, and be sure to be as up front and honest about your intentions as you expect the other party to be.
Carlo Gobba began his real estate career in 1996 and has now successfully sold over 1,100 properties totaling over $150 Million in sales. The average agent sells just 8 per year so (this is like havin....