Is Gazumping Illegal?

08th Oct, 2021 | Articles, First Home Buyer, Investor

In this article:
It's a nightmare scenario: you've made an offer on your dream home. The buyer agrees. A few days later you get the call to say the seller has accepted a higher offer. Unfortunately it happens. Is it illegal?

When you’re gazumped it can feel like your worst nightmare has come true. You’ve signed the contract, paid a deposit and agreed on a price for your home. But then the phone rings. It’s your real estate agent telling you the vendor has decided to sell to another buyer. Suddenly, they steal your dream home from under you without batting an eyelid.

Shock turns to anger and you think to yourself, ‘isn’t this illegal?’ It might seem unfair, but gazumping isn’t illegal – or at least not in all cases!

A property sale is only legally binding when there is an exchange of contracts. Even if you have a verbal agreement or a signed contract, the property isn’t legally yours when until the official contract exchange between you and the seller. A contract exchange is when both parties sign one copy of the contract, exchange the copies, then sign again.In most states of Australia, gazumping is legal. In the ACT, anti-gazumping laws require sellers to have all relevant documents attached to the contract. But even then, the time lag between offer and contract exchange can make it possible for the seller to accept an offer from another buyer.

It’s more common to see gazumping in competitive property markets where property prises are on the rise.

One way you can protect yourself from gazumping is buying at auction. Fortunately, for those buying a property at auction, gazumping can’t occur because there’s no cooling off period and the buyer is the naturally the highest bidder for the property.

There are several other ways you can protect yourself from being gazumped.

Get your finances in order

The best protection of all though, is getting pre-approval from the bank before trying to buy property. This means the bank has confirmed how much it’s willing to lend you and at what interest rate.

Not only does pre-approval send a clear message to the seller that you’re serious about buying the property, it also speeds up the time it takes to exchange contracts. Speak to your our home loan experts about what documents you’ll need to supply for a home loan pre-approval.


If you’ve made an offer and the seller has verbally agreed to sell you the property, prioritise getting a copy of the sale contract to your solicitor to review. One simple step you can take is to place a deadline on your offer. If it’s a reasonable offer, that you can support with market research in the area of similar properties, there’s less chance of being gazumped.

Minimise the delay between making an offer and exchanging contracts at settlement by having financial approval and your due diligence done well ahead of time.

Prioritise Inspections

Depending on where you buy property in Australia, inspections may be done before or after the contract is completed.

Some buyers make offers subject to a satisfactory inspection of the building and the property.** If you do this, tread carefully and make sure the wording of your clause is air-tight. It’s not uncommon for buyers to find that the clause only allows the buyer to get out of the contract if the inspection report identifies a major structural defect.

Even if you don’t get out of the contract, a building inspection report will give you more information about the property and its likely resale value. You can use this to negotiate on price or renegotiate terms in your contract with the seller.

Stand your ground

If the real estate agent is threatening to gazump you with a supposed ‘higher offer’, you can ask for written proof. There’s a chance the agent is simply trying to get a higher counter offer for their client, when in fact there is no other buyer.

Stand your ground and do not rush into a higher counter offer before you have written proof of any other offers.


**Some buyers request a due diligence clause to be inserted into the contract, which makes the contract and purchase agreement conditional upon an inspection report being produced by an expert consultant to assess the condition of the home. If the report is unsatisfactory to the buyer, they may retract their offer and cancel the contract.

Be careful, because these clauses are not common in residential properties where sellers aren’t keen on granter purchasers broad rights to terminate contracts. Due diligence clauses are more common in commercial properties and development sites with limited competition for buyers.

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