Gazumping explained — being outbid before contracts exchange in NSW and Victoria

The short version

Gazumping happens in a private-treaty (non-auction) sale. You make an offer, the agent tells you it's accepted, you start spending money on inspections, a valuation and a contract review — and then the seller accepts a higher offer from someone else. In NSW and Victoria a spoken agreement to sell land isn't binding: until both sides sign and contracts are exchanged, either party can walk away. Until that moment, you're exposed.

Why a handshake isn't a contract

The law in both states requires a contract for the sale of land to be in writing and signed before it binds anyone. In NSW that's section 54A of the Conveyancing Act 1919 (NSW); Victoria has its own equivalent writing requirement. An email from the agent saying "the vendor has accepted" feels like a deal, but it isn't one. The vendor can keep taking offers, and a better one can undo yours right up to the moment of exchange.

The holding deposit myth

When you make an offer you're often asked for a small holding deposit. It sounds like it locks the property in. It doesn't. A holding deposit is normally fully refundable and creates no obligation on the seller — it's a gesture of good faith, not a contract. Paying it does not stop the seller accepting a higher offer, and you get it back if you're gazumped.

The only real protection is exchange

Once contracts are exchanged the vendor is bound — even in NSW, where you then have a cooling-off period. Exchanging with cooling-off gives you the best of both: the seller can no longer gazump you, and you keep a short window (5 business days in NSW) to finalise finance and checks, backed by the 0.25% forfeiture if you decide to pull out. There's more in our NSW cooling-off guide and the Victorian one. So the practical goal, once your offer is accepted, is to get to exchange fast — which usually means having your contract reviewed and your finance moving before you offer, not after.

At auction there's no gazumping

Auctions remove gazumping entirely, because the winning bidder signs and exchanges on the spot — there's no gap for a higher offer to slip into. The trade-off is that you lose cooling-off and all your due diligence has to be done beforehand. Our auction contracts guide walks through what that means. It's the mirror image of a private sale: certainty of the deal, but no safety net afterwards.

What being gazumped actually costs

You don't lose your holding deposit — that comes back. What you lose is the money already spent chasing the purchase: a building and pest inspection, a strata report, a valuation, and any contract-review or legal fees. On a competitive property you can end up paying for the same round of checks more than once. It's why buyers who move quickly, and keep their early costs modest until they're close to exchange, are less exposed.

What to check before you sign

1. Have finance ready to move. Pre-approval in place before you offer, so a "yes" can turn into exchange in days, not weeks.
2. Get the contract reviewed early. The sooner you're comfortable with the special conditions and cooling-off setup, the sooner you can exchange. Our contract review checklist is a starting point.
3. Line up inspections in parallel, not one after another, so nothing needlessly holds up exchange.
4. Ask the agent to confirm the vendor's timeline in writing. It won't bind them, but it tells you how much competition you're up against.
5. Push for exchange rather than lingering in "accepted but not signed". Every day in that gap is a day you can be gazumped.

Common questions

Is gazumping legal?

Yes. Until contracts are exchanged, the seller is free to accept a better offer, and the agent is generally obliged to pass higher offers on to the vendor. It feels unfair, but it isn't unlawful in NSW or Victoria.

Can I stop it with an exclusivity agreement?

Some buyers ask for a short "lock-out" or exclusivity agreement, in which the seller agrees not to negotiate with anyone else for a set period. They're uncommon in residential sales and the seller has to agree to one, but in a hot market they can be worth raising. Take advice before relying on one — how well it holds up depends entirely on how it's drafted.

What's gazundering?

The reverse. Just before exchange, the buyer drops their offer, gambling that the seller is too committed to refuse. It's the same weakness — no binding contract until exchange — used the other way around. Both risks disappear the moment contracts are exchanged.

Does cooling-off protect me from gazumping?

Only after you've exchanged. Cooling-off is a right you get once you're already in a contract — see our Section 66W guide for how it can be waived. Before exchange there's no contract to cool off from, and that gap is exactly where gazumping happens.