If you've found the home you've been looking for, you may have agreed to terms with the seller. In this case, you may think that the formal presentation of an offer, a deposit and even a handshake should be sufficient. Many times this will be okay, and you can proceed to close with confidence, but this is not always the case, and you need to be aware of any risk. How can you avoid losing your dream home due to a process known as "gazumping."
Is It Cheating?
Some people think that the word gazumping originated from the Yiddish and means to overcharge or cheat. Either way, it describes a situation where the seller, even though they may have an agreement in place, decides to take a higher offer, essentially freezing you out of the deal. Unfortunately, as morally dubious as this may seem, it is not illegal, and if you're affected, you do not have any right to compensation for either your time or any other costs.
One Way to Avoid
Consider including a Section 66W certificate as part of the paperwork when you put forward your offer. You should get a conveyancer to help you with this paperwork to ensure that everything is done correctly and you are not at risk. If you do not include a Section 66W and only offer a small deposit, then there is a possibility that somebody else could come along with a bigger chequebook.
No Cooling off
Just bear in mind that if you do include a Section 66W, you will not be able to take advantage of any cooling-off period in your jurisdiction. This document essentially binds you to the deal, subject to any necessary inspections, but if you do pull out without a valid reason, you could lose your deposit. After all, the purpose of this certificate is to waive the cooling-off period altogether.
Ensure that you have all your financial affairs in order before you consider this approach. For example, if you do not have a firm decision from your lender and your loan is subsequently declined for any reason, you could lose your deposit.
What to Do Next
Talk everything through with your conveyancer before you act. It's not always in your best interests to lodge a 66W, and the conveyancer will help you consider all the pros and cons. But if you do want to avoid the threat of gazumping, it is certainly one way to proceed.
For more information on conveyancing, contact a professional near you.