The cooling off period is the very last stage that you, as a property buyer, can withdraw from the sale without major legal or financial consequences. So it’s important to know how it works and when it does or does not apply.
What is a cooling off period?
During a cooling off period, a buyer can withdraw from a property contract of sale without any legal repercussions even after they’ve signed it.
Cooling off periods are only available for property sales by private treaty and can vary between states and territories. They don’t apply for property bought at auction and are typically only available for buyers, not sellers. You can cancel the contract during the cooling off period, but you may also lose your deposit.
Make sure you check with your conveyancer or solicitor about whether a cooling off period is available or applies to your contact before you sign.
How long is a cooling off period?
Depending on your state, this varies from two up to five business days. In some states, however, there is no cooling off period at all, even for private treaty sales. Check the Fair Trading or Real Estate Institute website in your state.
A cooling off period can be extended provided the buyer and vendor both agree to it in writing. This can be useful if you need extra time to finalise your financing, for example.
Why would I withdraw from buying during the cooling off period?
There may be several reasons why you change your mind about buying a property even after you’ve signed the contract. These include:
- The building and pest inspection you’ve arranged to have conducted during the cooling-off period uncovers issues that change your mind about wanting to buy.
- Your finance may not be approved by your lender. This is why property contracts of sale often include clauses specifying that they’re ‘subject to loan approval’.
- Your financial position changes.
- Another property you’d prefer to buy becomes available.
- Information comes to hand that makes you decide the property is no longer right for you. For example, a new development may be approved that, when built, will block the views you expected to have when you signed the contract of sale.
What will it cost to withdraw during the cooling off period?
If you exercise your cooling off rights the vendor may be entitled to keep a small percentage of the deposit you’ve already paid, although you should then be refunded the rest.
In NSW, for instance, if you withdraw from the sale during the cooling off period you may need to pay the vendor 0.25% of the purchase price.
How do you withdraw during the cooling off period?
You’ll usually need to notify the vendor’s real estate agent in writing of your intention to withdraw. Your conveyancer or solicitor can prepare a letter on your behalf and fax, email, mail or deliver it to the agent before 5pm on the final business day of the cooling off window.
Can the cooling off period be waived?
Yes. If you’re particularly keen on buying a certain property, offering to waive the cooling off period can signal your strong interest to the vendor and may help you secure the purchase over any competing bidders. This is what’s known as an ‘unconditional contract of sale’.
Bear in mind, however, that cooling off periods exist to protect buyers against last-minute developments.