Did you know that you can change your mind when it comes to a property purchase? In most states and territories in Australia, property buyers are allowed to rescind their purchase contract. This can be done by taking advantage of the “cooling-off period.”
To find out more about how the cooling-off period works, here are some things to take note of:
The cooling-off period begins once you have received a written copy of the contract with your signature and the vendor’s signature. The cooling-off period typically lasts for five business days— weekends and holidays are excluded. How long you have to cancel your contract without penalty, and the amount of penalty you need to pay after this cooling-off period will depend on your location.
Buying your first property is known to be an emotionally charged process and you may accidentally overlook some details in the house you don’t like. It could be a lack of amenities, the small number of bedrooms, or maybe the neighbourhood. Mistakes happen. That’s where a cooling-off period has its advantages.
The cooling-off period starts once you exchange contracts and ends at 5pm on the last business day of the cooling-off period. If you bought a property at auction, a cooling-off period will not apply, unless you negotiate one with the seller.
Check out the table below for a state and territory breakdown of how long the cooling-off period is and how much it will cost if you pull out:
|State/territory||Cooling-off period||Percentage of sale price payable|
|New South Wales||5 business days||0.25%|
|Victoria||3 business days||0.20%|
|Queensland||5 business days||0.25%|
|South Australia||2 business days||$100 holding deposit|
|Western Australia||No cooling-off period||100%|
|Australian Capital Territory||5 business days||0.25%|
|Tasmania||No cooling-off period||100%|
|Northern Territory||4 business days||Nil|
There are a number of reasons you might decide to pull out during your cooling-off period, including:
The building and pest inspection discovers issues
The lender doesn’t approve your loan
You lose a source of income, like a job
You find a property you’re more interested in
You discover other information about the home or the surrounding area. For example, construction on a high-rise building will begin in six months next to your house, which will be very loud and block your view.
How much it will cost to withdraw in the cooling-off period will come down to where the home is in the country. For example, in New South Wales, it’s 0.25% of the sale price of the home while in South Australia, you’ll lose the $100 holding deposit you paid. You can see a full list of how much it costs to withdraw in each state and territory in the table above.
It’s possible to withdraw from the sale of a home after the cooling-off period but it could be very expensive. Your contract will have clauses outlining the charges for doing this, and you may have to pay default penalties and compensate the seller for losses they may have experienced. You’ll also have wasted the money you forked out on legal and conveyancing fees, the building and pest inspection, and any other expenses involved in making the offer.
In some states, you can elect to reduce or waive the cooling-off period in a contract. This means you cannot back out of your property purchase, making the contract legally binding. This can be a way of indicating to the seller that you are a serious purchaser. This must always be done in writing, and some states require forms to be completed by your conveyancer or solicitor, to ensure that you understand the ramification of waiving the cooling-off period.
Take note that only the buyer has the ability to waive their right, not the seller.
Buying a house has its procedures. Be sure to read the fine print carefully before you sign any contract and make sure you get legal advice from a solicitor or conveyancer.