One of the most important things to remember when buying a property is that the Contract is not binding on either the purchaser or seller until Contracts are exchanged. That is the contract, evidencing all of the important terms have been signed by both the vendor and purchaser and the contracts have physically been exchanged.
Agents are legally bound to pass on to owners all offers made up to exchange. This means that although your offer has been accepted, another buyer may also make an offer on the property. One of the following may then happen:-
- The Vendor may decide to continue with the sale to you
- If the second buyer’s offer is the same as yours you may end up in a ‘Contract race’ – essentially the first buyer to submit a signed Contract to the owners Solicitor/Conveyancer for exchange will be the successful buyer. In this scenario the most ‘organised’ buyer (with finance already approved etc) has an advantage.
- If the second buyer’s offer is higher than yours you may be encouraged by the agent to increase your offer, or the owner might simply decide to sell to the buyer with the highest offer – this is gazumping, and unfortunately it is completely legal.
Contract races and gazumping are extremely stressful for buyers – after all, you really want this property!
So, how can you avoid ending up in a Contract race, or being gazumped?
The best advice is to be organised, so when you find your dream property you are ready to go.
Finance approval – go to see your bank or broker early and get pre approval. This will allow you to know your budget and give you confidence when making an offer.
Deposit – generally a cash deposit of 10% is required, although a reduced deposit or a deposit bond may be accepted by the owner of a property. Know how you are going to pay the deposit, and when you make your offer be ready to pay it straight away. The deposit can be paid any time up to exchange, but it is a great ‘sign of good faith’ to a Vendor when you pay it nice and early. You will get your deposit back if you don’t proceed to exchange.
Get Advice – before you make an offer get a copy of the Contract from the agent and have your Solicitor/Conveyancer have a look at it. This will alert you to any issues early on.
Inspections – decide what inspections you want to do on the property (eg Pest and Building Reports) and arrange these as soon as possible once your offer has been accepted.
Buying a property is an exciting, but often stressful time. Our Property Law Team is ready to assist you because Helping You is Our Business.
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