Groundwork can secure homes as real estate market rebounds

Media release - 11th April, 2013

Buyers slow to move on home purchases risk missing out

  • Australian real estate is gathering momentum with RP Data reporting average property values in capital cities have increased by almost 5% since May 2012
  • Rebounding values could result in greater incidences of ‘gazumping’ warns Angus Raine, CEO Raine & Horne
  • According to Mr Raine homebuyers can follow a number of simple steps to avoid missing out on a property
  • Ultimately it’s the vendor – and not the real estate agent – who decides which price is accepted, advises Greg Jemmeson, Senior Partner, Jemmeson & Fisher

Improving buyer demand is driving up property values, with the latest report from RP Data stating that real estate values in Australia’s combined capital cities are up almost 5% since the market bottomed in May 2012.

As a result, Angus Raine, CEO of Raine & Horne, is warning that increased competition can result in unprepared buyers missing out on a property.

“Already I have received my first telephone calls from consumers beaten to the punch for a property, and this is historically a sign the market is hotting up,” says Mr Raine, who has experienced a number of real estate cycles since 1987.

“This situation is referred to as ‘gazumping’, which is an often misunderstood term that describes someone who is disappointed by missing out on a property.”

According to the NSW Department of Fair Trading, ‘gazumping’ occurs when buyers have a verbal agreement with an agent or seller to buy a property at an agreed price.

“However, until contracts are exchanged between the solicitors representing the vendor and buyer, there is nothing legally prohibiting another party offering a stronger bid to secure the property,” says Mr Raine.

“In NSW, a home is still for sale until a prospective buyer and a vendor have exchanged contracts, and a deposit, which is usually 10% of the purchase price, has been paid.”

To avoid missing out, Mr Raine advises aspirant buyers to familiarise themselves with the steps involved in buying a property.

“I’d also urge committed buyers to be quick to exchange contracts and pay a deposit, once they hit upon a suitable, well-located home, for the right price,” says Mr Raine.  

“Consumers who are slow to exchange contracts put themselves at a greater risk of missing out on a property,” says Mr Raine.

Buyers can also lock up a property with pre-approved finance.

“Finance approval can sometimes take up to a week and during this time, another party can offer a higher bid,” adds Mr Raine.

“Purchasing a property at auction can also assist hopeful buyers to secure a home. Once the gavel falls, you cannot miss out with your winning bid and there are no grey areas.

“That said, successful bidders will be required to exchange contracts with a signed deposit cheque immediately after the auction.”

Greg Jemmeson, Senior Partner of Sydney-based law firm Jemmeson & Fisher, advises that real estate agents are obligated by law to pass on all offers to a vendor before contracts are exchanged.

“Ultimately it’s the vendor – and not the real estate agent – who decides which price is accepted,” says Mr Jemmeson.

As for issues of compensation, Mr Jemmeson states that neither an agent nor the vendor is obliged to compensate a potential buyer for the costs of legal advice, inspection reports, finance application costs or inquiries, should he or she miss out on a home.  

“That said, signing a contract with a cooling-off period gives you time to perform a building and pest inspection without getting gazumped, however, if you decide not to proceed, you will forfeit 0.25% of the purchase price to the vendor,” says Mr Jemmeson.

BREAKOUT:

Tips to avoid being gazumped

  • Have your finances pre-approved before making an offer
  • Obtain a copy of the Contract of Sale promptly, and pass it to your solicitor or conveyancer
  • Research your market so that you can be confident of putting forward a winning offer – then be prepared to move quickly to exchange contracts
  • Put an offer in writing – the law requires real estate agents to present all offers to the vendor
  • Signing a cooling-off period gives buyers time to organise a building and pest inspection without being gazumped. However if you don’t proceed, you will forfeit 0.25% of the purchase price to the vendor.

 

-ENDS-

For further media information contact:

Angus Raine, CEO Raine & Horne, on 0409 920 697

Greg Jemmeson, Senior Partner Jemmeson & Fisher, on 02 9267 6263

Andrew Harrington, National Marketing & Communications Coordinator, on 02 9258 5400