When a property purchase negotiation reaches an agreement, the risk of gazumping—where the seller accepts a higher offer from another buyer after verbally agreeing to sell to the initial buyer—remains a significant concern. To mitigate this risk, it is essential to follow up in writing, confirming the offer and acceptance, and ensuring that the purchaser performs on the agreement promptly, including transferring the deposit funds and instructing the selling agent to remove the property from the market. Let’s discuss this from legal, moral, and ethical perspectives.
Legal Perspective
- Written Confirmation:
- Contractual Agreement: The agreement must be in writing to create a binding contract. Verbal agreements in real estate transactions are generally not legally enforceable. Both parties provide clear evidence of the agreed terms by following up in writing.
- Deposit Transfer: The prompt deposit transfer (usually 10% of the purchase price) is crucial. This not only demonstrates the buyer’s commitment but also satisfies the legal requirement for consideration, which is essential for a valid contract.
- Removing the Property from the Market: Instructing the selling agent to remove the property from the market helps solidify the agreement. This action can be included as a term in the written contract to ensure the seller’s compliance.
- Remedies for Gazumping:
- Legal Recourse: If the seller accepts another offer after the initial agreement, the buyer may have legal recourse if a binding contract was formed. However, proving a verbal agreement can be challenging, highlighting the importance of written confirmation.
- Deposit Protection: In some jurisdictions, the deposit may be held in a trust or escrow account, offering some protection to the buyer if the seller breaches the agreement.
Moral Perspective
- Trust and Good Faith:
- Ethical Conduct: Gazumping undermines trust and good faith in property transactions. By confirming the agreement in writing and transferring the deposit promptly, the buyer acts in good faith and expects the seller to do the same.
- Transparency: Clear communication and documentation help maintain transparency and integrity in the transaction, reducing the likelihood of misunderstandings or disputes.
- Fairness:
- Buyer’s Expectations: Buyers invest time, money, and emotional energy into purchasing a property. Gazumping disregards these investments and can cause significant distress. Ensuring written confirmation and immediate performance on the agreement demonstrates fairness and respect for the buyer’s efforts.
Ethical Perspective
- Professional Responsibility:
- Selling Agent’s Duty: Real estate agents have an ethical obligation to act in the best interests of their clients while maintaining fairness and honesty. By removing the property from the market upon acceptance of an offer, the selling agent upholds their ethical duty to honour the agreement.
- Buyer’s Agent’s Role: The buyer’s agent must advocate for their client by ensuring all agreements are documented and urging prompt performance to protect the buyer’s interests.
- Industry Standards:
- Reputation and Trust: Ethical behaviour in property transactions builds trust and enhances the reputation of professionals involved. Gazumping can tarnish the reputations of sellers and agents, leading to long-term negative consequences.
- Consumer Protection: Ethical practices protect consumers from unfair treatment and promote a more stable and reliable property market.
Practical Steps
- Document Everything:
- Send a written confirmation of the offer and acceptance to both the selling agent and the seller.
- Include all agreed terms, such as the purchase price, deposit amount, and timeline for the transfer of funds.
- Transfer the Deposit Promptly:
- Arrange for the deposit to be transferred as soon as the agreement is reached. Provide proof of transfer to the selling agent and seller.
- Instruct the Selling Agent:
- Clearly instruct the selling agent to remove the property from the market and confirm this action in writing.
- Engage Legal Professionals:
- Have a legal professional review the contract and ensure all terms are clearly defined and enforceable.
- Follow Up:
- Maintain regular communication with all parties involved to ensure that the agreement progresses smoothly and address any concerns promptly.
By taking these steps, buyers and their agents can reduce the risk of gazumping and ensure a smoother, more transparent transaction process.
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