Buying FAQ –
Gazumping occurs when you have a verbal agreement with an agent or seller to buy a property at an agreed price but the property is not sold to you in the end. This usually happens when the vendor (the person selling the property) has decided to sell the property to someone else, usually for a higher amount. The agent is legally obliged to pass on to the vendor any further offers received for the property up until the exchange of contracts.
If you are gazumped, neither the agent nor the vendor is obliged to compensate you for any money you may have spent on legal advice, inspection reports, finance application costs or inquiries. However, your ‘expression of interest’ payment (if you have paid one) must be refunded to you in full.
When making an offer on a private treaty property you should consider where you see value as compared to other similar properties you have looked at. The sales agent will be able to give you some guidance as to what a realistic figure would be, giving consideration to interest from other buyers, the seller’s expectations, recent comparable sales and other properties currently for sale.
Some sellers will consider selling their property prior to auction for an acceptable offer while others will not. The agent will be able to give you guidance on whether or not the owner is accepting offers prior and in what form these offers will need to be made. In most cases any offers made prior to auction will need to be in the form of an offer on an Unconditional Contract of Sale.
An Unconditional Contract of Sale means that the Contract of Sale is accompanied by a Section 66W Certificate, which your solicitor can provide. It effectively waives the five day cooling off period and means the contract is unconditional once exchanged. The seller and the agent are not obliged to inform other interested buyers that the property is going to be sold prior to auction but in most cases will do so.
It is important to let the agent know that you’re interested in a property going to auction as soon as possible. Inform them of what you may consider paying so that they know to contact you if a sale prior to auction becomes likely.
An Unconditional Contract of Sale is accompanied by a Section 66W Certificate which your solicitor or conveyancer will provide you with. This effectively waives the five day cooling off period of the standard Contract of Sale for a private treaty sale, and the contract is unconditional once exchanged. This means there is no backing out without some financial consequences.
The sales agent will be able to give you some guidance as to an acceptable value , taking into consideration the interest from other buyers, the seller’s expectations, recent comparable sales and other properties currently for sale.
It is advisable to maintain contact with the agent leading up to the auction so you are aware of any changes in what the property will likely reach on auction day. The agent will also be able to give you feedback on whether the price you are prepared to pay is within the likely selling range.
Making an offer on a Contract of Sale is often a good way for a buyer to show you that they’re serious and ready to purchase, so you may choose to instruct your agent that you will only consider such offers. If an offer as set out in the contract is acceptable then you can go ahead and exchange contracts with the buyer.
To participate or bid at an auction, potential buyers must register with the vendor’s agent and be given a bidder’s number. The auctioneer oversees the bidding process. They take bids from potential buyers and keep track of the current bid price. Before auctioning a property, the seller will nominate a reserve price, which is usually not advertised. If the bidding continues beyond the reserve price, the property is sold at the fall of the hammer. If you are the successful bidder, you must sign the contract of sale and pay the deposit on the spot (usually around 10 per cent of the purchase price).
The agent and auctioneer will ask you as the vendor to set a reserve price in writing prior to the auction – your agent will be a wealth of information in helping you to reach this figure. This is often done in the days leading up to the auction and is based on feedback given by interested buyers. You are under no obligation to sell the property until the reserve price is met or exceeded during the auction.
Under section 59 of the Act, the agency agreement must be signed by or on behalf of the client. If there is more than one client, a signature is required for each client.
The cooling-off period commences when the agreement has been signed by or for each of the client/s and ends at 5pm on the next business day or Saturday. Public holidays, bank holidays and Sundays are not included in the cooling-off period.
For example, if the client signs the agreement on a Friday, the cooling-off period ends at 5pm on the following Saturday. If they sign on a Saturday, the cooling-off period ends at 5pm on Monday, unless that is a public or bank holiday, in which case it will usually end at 5pm on Tuesday.
The length of the cooling-off period can be extended if the agent and client agree. This can be done in two ways:
The contract exchange is a critical point in the sale process:
- the buyer or seller is not legally bound until signed copies of the contract are exchanged
- buyers of residential property usually have a cooling-off period of five working days following the exchange of contracts during which they can withdraw from the sale
- if the agent arranges exchange of contacts, the agent must give copies of the signed contract to each party or their solicitor or conveyancer within 2 business days
- the cooling-off period can be waived, reduced or extended by negotiation
- there is no cooling-off period for sellers; once contracts have been exchanged, sellers are generally bound to complete the agreement
- there is no cooling-off period when purchasing at auction
Having obtained a Contract of Sale from the sales agent, you will need to have it looked at by either a solicitor or a specialised property conveyancer. However conveyancers cannot give legal advice. If something on a legal perspective needs attention then a specialist property solicitor can take action where as a conveyancer will refer you to a solicitor.
What do I do if the buyer requests access to the property before settlement?
Buyers are entitled to an inspection prior to settlement – known as the pre-settlement inspection – to ensure the property is as per the conditions set out in the contract of sale. Your agent will be available to arrange access for this. You are not required to give any other access to the buyer prior to settlement however buyers will often request additional access for various reasons – wanting to take measurements or get quotes to prepare for work they plan to do after settlement. You do not have to allow this, but may do so at your discretion.
It is usually a good idea to arrange your move from the property a few days prior to settlement as it must be completely vacant and clean on settlement day (unless there is an ongoing tenancy in place).
On settlement day your solicitor and the buyer’s solicitor will forward to your agent notification that the property has settled. Once your agent receives these instructions in writing they are able to release keys to the buyer. The agent will not release the keys without first receiving these written instructions from the solicitors even if they have been verbally told that the property has settled. Your solicitor should also notify your agent of how the deposit funds are to be sent to you or your bank following settlement. These should be sent well in advance of settlement and you should allow a few days following settlement for the agent to be able to release these funds to you.
On settlement day, which is agreed upon in the Contract of Sale, your solicitor will notify you that the property has settled, which means that you are now the rightful owner. Once the sales agent receives instructions in writing (verbally isn’t enough) from the vendor’s solicitor, they are able to release keys to the property to you.
This website along with the frequently ask questions is for general informational purposes only & is not intended to provide commercial, financial, investment, accounting, tax or legal advice. It is provided to you for your own personal use. The information provided is of a general nature only & has not taken into account your specific objectives, needs & financial situation. The information may not be appropriate to your individual needs & you should seek advice from your financial adviser before making any financial decisions.