When you purchase a residential property, whether as an investment or your own home, there are certain standard conditions included in the Contract of Sale.
The ‘cooling off period’ is one such clause, which essentially gives you the ability to rescind on the contract without losing your deposit, so long as you provide written notice that you’re invoking the cooling off period before 5pm on the date it ends.
Purchasers are protected under this clause should you change your mind and want to back out of the transaction.
You should be aware, though, that cancellation of the contract incurs a penalty equivalent to 0.25% of the total selling price of the property. So if the property sells at $600,000, the penalty will be around $1,500. As the seller, on the other hand, once the contract is terminated within the cooling off period, you must give back the deposit within 14 days after the cancellation with the penalty already deducted.
The rules regarding cooling off periods can vary between states and territories. Some states might not even have a cooling off period; thus, it is advisable that you ask your solicitor what rules apply in your area. You can get an idea of the differences between states below:
|
State |
Cooling off period |
Percentage of sale price you forfeit |
|---|---|---|
|
Queensland |
Five business days |
0.25% |
|
Victoria |
Three business days |
0.2% |
|
WA |
No cooling off period is mandated in WA law, so if your contract doesn’t include one then it doesn’t exist |
100% |
|
NSW |
Five business days |
0.25% |
|
ACT |
Five business days |
0.25% |
|
NT |
Four business days if purchaser isn’t represented by a conveyancer or solicitor |
Nil |
|
SA |
Two business days |
Small holding deposit is forfeited (up to $100) |
|
Tasmania |
None (The Tasmanian govt will be introducing a two day cooling off period shortly) |
100% |
Is there always cooling off period
The short answer is no.
Cooling off periods only apply to a private settlement (or private treaty) when buying a house, not through an auction. However, if the seller and buyer personally negotiate the contract after the auction, a cooling off period may apply.
You can negotiate a subject to finance clause with the vendor.
This is different to a cooling off period, which you’re not entitled to when buying at auction.
The only way you can keep the majority of your deposit is if you sign a sales contract that includes this clause and you give the vendors notice that you were unable to obtain finance approval in writing by the agreed timeline.
Steps of the cooling off process
- The agent must give you a copy of the unsigned contract at least one business day before the agreement is signed.
- The agent must give you a copy of the consumer guide regarding agreements done when selling a residential property at least one business day before the agreement is signed.
- You, the client, must sign the waiver form approved by the Office of Fair Trading before signing the agreement.
Can I negotiate a better deal by waiving the cooling off period?
Purchasers traditionally have a few weapons in their arsenal when it comes to negotiating contract terms that may entice the seller into accepting a lower price for their property.
Although you can ask your solicitor to write up a certificate to waive the cooling off period as a negotiation tactic, using this approach may not really advisable.
Once you give up your right to cancel the contract you are locked into completing the transaction.
This can be dangerous, particularly if you start to feel that you may have been pressured into signing an unconditional Contract of Sale by a persuasive salesperson.
This scenario is more common than you think and while you might believe it would never happen to you, we have seen slick talking product spruikers drag many supposedly savvy property players into deals they should never have made.
In an ideal world, as an educated homebuyer and property investor, you won’t need to enforce a contractual cooling off period on the dwelling you buy, because either you or your buyers agent will have undertaken extensive due diligence to ensure the commitment you are making suits your personal circumstances and goals.
However the cooling off period does provide you with that last little bit of wiggle room though, so think carefully about how and when you might use it.
How can a conveyancer help me?
Conveyancers are experts in subject to finance wording and other conditions, helping you to reach settlement while also protecting your legal rights.
They can also help you save thousands because they stop you from losing your deposit should your home loan application be declined.
We have a list of recommended conveyancers for each state that will assist on your home buying journey.
They can assess the Contract of Sale for your state and negotiate changes that are in your best interests.
Give us a call on 0400 111 986 or fill in our free assessment form and we can help you qualify for a home loan.