Why a Good-Faith Deposit Might Not Work

Gazumped—this is certainly a strange word that may have its origin in Yiddish and is not often used in everyday parlance. However, it is something that a would-be home buyer needs to avoid at all costs if they are going to secure the home of their dreams. If you're itching to get your hands on just such a property, you may think that you are 'safe' and can never be gazumped, as you've already put a deposit down in good faith. However, this is not necessarily the case, and you should carefully consider your position.

It's a Seller's Market

The housing market is quite hot at the moment, and properties are changing hands in a relatively short amount of time. This makes it a very good environment for the seller and a little bit more challenging for the buyer. Consequently, if you come across something that really works for you and may well represent the end of your trail, then you should formalise the situation as soon as possible.

Legally Binding

In other words, you should enter into a contract with the seller, making sure that it is subject to your due diligence and further research. If you do so, this type of document will prohibit the seller from marketing the property to a higher bidder. Contrary to popular belief, they are not forced to take the house off the market if you give them a good-faith deposit, even though you'd like to think this was the case.

Time to Cool Down

When you exchange contracts as part of a legally enforceable agreement, you will have a cooling-off period. This means that you can still walk away from this agreement within a certain number of days. Certainly, you will have to pay a termination fee, but this is typically a small fraction of the purchase price. If you have paid any deposit and decide not to proceed, then the balance of this money will need to be refunded to you.

It's Not Worth the Risk

You've been dreaming about this type of home for a long time now, and it would be a shame if you were to lose out. Avoid the trauma of being gazumped and enter into a legally binding contract instead. Ask your conveyancing professional to draw a legal contract up as soon as you can so you will be able to sleep much better at night.