Gazumping in NSW: Can You Be Outbid After Your Offer Is Accepted?
Yes, and it is legal. Until contracts are exchanged, the seller can take a higher offer. Here is how that gap works, and how to close it quickly.
Your offer was accepted, the agent shook your hand, you paid a “holding deposit”, well at least that’s what the agent called it, and booked the building inspection. Then a week later the agent calls to say the property has sold to someone else for more money. That is gazumping, and in New South Wales it is perfectly legal right up until the moment contracts are exchanged. The good news is that the window it happens in is one you can shorten.
At a glance
- Nothing is binding in NSW until contracts are exchanged, so a seller can accept a better offer at any point before that.
- A deposit DOES NOT secure the property. If you are outbid, you will be refunded in full.
- The only real protection is speed, and the fastest route is often exchanging with a cooling-off period rather than waiting until every check is finished.
In plain English
Exchange is the moment two signed contracts are swapped, one from you and one from the seller, and a deposit of 0.25% of the agreed price is paid to the agent.
Before that moment of exchange, there is no deal, no matter what has been agreed verbally, written in an email, or paid to the agent. AFTER exchange the seller cannot sell to anybody else.
What gazumping actually is
NSW Fair Trading describes gazumping as an agent or seller accepting your offer at an agreed price and then selling the property to someone else, usually because that other buyer offered more.
It can also happen without another buyer at all. A seller who changes their mind, decides to relist in spring, or wants better terms is free to walk away from an accepted offer, because an accepted offer is not a contract.
Why it is legal in NSW
A property sale in NSW becomes binding on both parties at exchange of contracts, and only at exchange. Until then either side can change their mind. That cuts both ways: you are equally free to walk away with no penalty during that same window.
The agent is not being underhanded by passing on a higher offer either. An agent is legally obliged to present every offer they receive to the seller, right up until contracts exchange.
What does not protect you
A verbal agreement. Handshakes, phone calls and “the vendor has accepted” emails create no obligation on anyone.
A holding deposit or expression of interest payment. Paying it proves you are serious. It does not take the property off the market, and the agent can accept holding deposits from more than one buyer on the same property.
Having the contract sitting with your conveyancer. A contract in your hands, even a signed one, does nothing until it has been swapped with the seller’s.
How to close the gap
Every day between your offer being accepted and contracts exchanging is a day you can be gazumped. Everything below is about making that stretch shorter.
Have your conveyancer lined up before you offer, not after
Most of the delay in that window is administrative. If we already have your details and can start on the contract the same hour the agent sends it through, you have removed days from the timeline before you even made the offer.
Get the contract reviewed before your offer, if you can
The contract is available from the moment the property is listed. You are entitled to ask for it and have it reviewed while you are still deciding whether to offer. Buyers who do this are ready to sign when everyone else is still waiting for a review to come back.
It’s also a great opportunity to review the INCLUSIONS on the first page of the contract. Are all the inclusions ticked correctly? This is the biggest thing missed by buyers and real estate agents. It also causes long delays to exchange when items are missed or not ticked on the inclusions list.
Have finance pre-approved and deposit funds ready
Not “we have spoken to a broker”, but an actual pre-approval, with the deposit sitting somewhere you can access it immediately. A deposit bond is worth asking about if your cash is tied up in a sale.
Put the offer in writing, with a date for exchange
Sellers respond to certainty as well as price. An offer that names a realistic settlement date, deposit size (5% or 10%) and shows finance is already pre-approved often beats a slightly higher offer from someone who cannot move for three weeks.
Consider exchanging with a cooling-off period
This is the one most buyers do not know about, so it has its own section below.
“Which is going to cause more tears? Losing the deposit or losing the house?”
The cooling-off route, which almost nobody uses
NSW introduced the cooling-off period as anti-gazumping legislation. It is still on the books, and it is still barely used, which is a shame because it does exactly what worried buyers want.
The idea is that you exchange contracts straight away, which takes the property off the market immediately, and then do your building and pest inspection, finalise your finance and finish your enquiries during the five business days that follow. If something turns up that you cannot live with, you rescind and forfeit 0.25% of the purchase price. On an $800,000 property that is $2,000.
Whether that is the right call depends on how much of your due diligence is already done and how exposed you feel in that property market. It is a real option worth raising rather than assuming your only choice is to wait. Be aware that many sellers will ask you to waive cooling-off with a 66W certificate, which is a different decision with different risks.
Gazumping cannot happen at auction. When the hammer falls, contracts exchange on the spot and the sale is binding immediately.
What happens if you are gazumped anyway
Your holding deposit or expression of interest payment must be refunded to you in full. Ask for it in writing and keep the record.
What you cannot recover is everything else you spent. Building and pest inspection fees, conveyancing costs, strata report fees, valuation and finance application costs all sit with you, and neither the agent nor the seller has any obligation to reimburse them. That is the real cost of being gazumped, and it is usually somewhere between several hundred and a couple of thousand dollars.
If a refund of the holding deposit is refused, tell us and we will take it up.
The short version
You cannot make gazumping illegal, and you cannot make a seller honour a handshake. What you can do is compress the days between acceptance and exchange down to as few as possible, because that window is the only place gazumping lives. Start with us before you offer rather than after, and the window gets a lot smaller.
Thinking of making an offer?
Talk to Justin, Julie, Amanda or Nicole before you do. Getting the contract reviewed early is the cheapest protection there is.
