The cooling off period is the final chance the property buyer can withdraw from the sale without major legal or financial consequences. It’s important to know how it works and when it does or does not apply.
When does the cooling period start?
In Australia, the cooling-off period starts as soon as you exchange contracts and ends at 5pm on the 5th business day after the day of exchange. This can however vary by state or territory.
For example, if you exchange contracts at 10am on Tuesday, the cooling off period will end at 5pm on Tuesday the following week. During this period, you may get out of the contract as long as you give written notice.
A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
You can waive the cooling-off period by giving the vendor a ‘66W certificate’. This certificate is issued by a lawyer and states that you have been advised of the implications of waiving your cooling-off rights. It is also possible to reduce or extend the cooling-off period by written agreement with the vendor.
If you use your cooling-off rights and withdraw from the contract during the 5-business day period, you will have to pay the vendor 0.25 percent of the purchase price. This works out to be $250 for every $100,000.
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 are no cooling off period at all, even for private treaty sales. Check the Fair Trading or Real Estate Institute website in your respective state for the most up to date information.
In NSW, buying a residential property in NSW allows you 5-business days of a cooling-off period after you exchange contracts for private treaty sales.
In NSW, A longer cooling-off period applies for properties sold off the plan, because these contracts are often large and complex. For off the plan properties, the industry standard in NSW is 10-business days for cooling off periods.
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.
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.
For off the plan apartments, sometimes the vendor allow special conditions where they will not take a percentage of deposit, but they will ask you for a smaller holding deposit to make sure you are serious buyer. Depending on the vendor they may fully refund this holding deposit slhould you change your mind on the purchase during the cooling off period, or they may take a smaller refund penalty fee of the holding deposit (say $500).
