Media release - 11^th 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.

Source: Raine and Horne

For further media information contact:

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

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

Groundwork can secure homes as real estate market rebounds