Understanding Gazumping: Risks & Strategies for Homebuyers

Buying a home is a major milestone, but unexpected challenges can arise before closing the deal. One such issue is gazumping, a term that refers to when a seller backs out of a verbal agreement to sell their property and instead accepts a higher offer from another buyer. This can leave the initial buyer disappointed, financially strained, and without recourse if proper legal safeguards are not in place.

What is Gazumping?

Gazumping occurs when a seller agrees to sell a property to a buyer but later withdraws from the agreement in favor of another buyer offering a higher price. This practice is more common in highly competitive real estate markets and often happens before the official contract signing.

Why Does Gazumping Happen?

• Market Competition: In a seller’s market, multiple buyers may be competing for the same property, leading to bidding wars.
• Verbal Agreements: In some cases, buyers and sellers agree on a deal verbally or informally before signing a contract, making it easier for the seller to change their mind.
• Agent Influence: Some real estate agents may encourage sellers to entertain higher offers even after a verbal commitment.

How to Protect Yourself from Gazumping

While gazumping can be frustrating, buyers can take several steps to minimize their risk:

1. Secure a Signed Contract Quickly

Once you and the seller agree on the purchase price, work with your agent to draft and sign a formal contract immediately. Learn about the home buying process to understand each step.

2. Request a Reservation Agreement

In the Philippines, some developers offer a reservation agreement that requires a non-refundable deposit to secure the property. This ensures that the seller will not entertain other offers during the agreement period.

3. Work with a Reliable Real Estate Agent

An experienced agent can help you navigate the complexities of buying a property and negotiate favorable terms. Find out more about the importance of choosing the right real estate professional.

4. Be Financially Prepared

Delays in securing financing can give sellers an opportunity to entertain other offers. Get pre-approved for a home loan before making an offer. Learn about home financing options in the Philippines.

Is Gazumping Legal in the Philippines?

Currently, there are no laws that explicitly prohibit gazumping in the Philippines. However, buyers can protect themselves through legally binding contracts. It is advisable to consult a real estate lawyer to ensure your purchase agreement includes provisions that prevent sellers from backing out unfairly.

Final Thoughts

Gazumping is a frustrating but preventable issue. By securing a formal contract, working with a reputable agent, and understanding your rights, you can significantly reduce your risk of losing your dream home to another buyer. Stay informed about real estate best practices to make confident and secure property decisions.