Cooling off period when selling a house

How cooling off periods work when buying a house

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How to exercise your right to a cooling off period

When buying a property, there's a critical stage that happens after you sign the contract called the cooling off period.

This stage starts on the same day you received a copy of the contract you and the seller have signed. This cooling off period is usually five business days long - Sundays and public holidays not included. If you change your mind about buying a property during this time, you can cancel the sale.

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 $500,000, the penalty will be around $1,250. 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

What you stand to lose on a $500,000 purchase

Queensland

Five business days

0.25%

$1,250

Victoria

Three business days

0.2%

$1000

WA

None

100%

$500,000

NSW

Five business days

0.25%

$1,250

ACT

Five business days

0.25%

$1,250

NT

Four business days if purchaser isn't represented by a conveyancer or solicitor

Nil

Nil

SA

Two business days

Small holding deposit is forfeited (up to $100)

$100

Tasmania

None (The Tasmanian govt will be introducing a two day cooling off period shortly)

100%

$500,000

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.

Steps of the cooling off process

  1. The agent must give you a copy of the unsigned contract at least one business day before the agreement is signed.
  2. 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.
  3. You, the client, must sign the waiver form approved by the Office of Fair Trading before signing the agreement.

How does the cooling off period work?

The cooling off period when buying a house is usually five business days. It starts on the day you received a copy of the signed contract and ends at 5PM on the last day of the period. If there are public holidays or a Sunday in between the period, it will not be counted as part of the business days. It is advisable to ask for a notice of receipt when the contract is delivered as a proof when the cooling off period started.

During this time your solicitor or conveyancer can make enquiries to detect further problems. These enquiries may include building and survey report, or the certificate of compliance secured from the local office. If there are any problems, you have the option to terminate or cancel the agreement.

When you wish to rescind the agreement, you have to write a letter or notice of termination to the agent without any explanations as to why you are cancelling the contract. This letter should be rendered within the cooling off period and not after since you will be bound by the contract after that.

There are three ways that you can render the letter of termination – given personally to the agent, mailed or delivered to the agent’s business address, or delivered to a place assigned in the agreement should a cancellation take place.

Selling a house?

If you are selling your house and have had your sale cancelled within the cooling off period, find out you can put your home back on the market.

Who receives the penalty payment if the buyer backs out of a contract during a cooling-off period?

As the above table shows, you’ll have to pay a penalty when you terminate a contract during the cooling-off period. This amounts to 0.2% of the sale price in Victoria, or 0.25% in NSW. This amount is paid to the seller of the property.

While it may be necessary for you to withdraw from the contract, you must be aware that this will cause stress and inconvenience to the seller. They would have paid legal fees and they also would have missed out on other potential buyers and offers while negotiating the sale of their property to you.

This penalty is paid to the seller to compensate for their losses.

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What if I want to back out of the contract after the cooling-off period?

If you wish to back out of a contract after the cooling-off period has ended, it could be costly.

Your contract will contain details about the penalties imposed if you decide to withdraw from the binding agreement you have signed after the cooling-off period has expired. You’ll most likely have to pay default penalties and compensate the seller for any losses they have experienced. Plus, you will also lose the money you have already put towards legal and conveyancing fees, building and pest inspections, and any other property purchase expenses.

If you're unsure about your rights in this situation or the implications of withdrawing from a contract after the cooling-off period, discuss your options with a solicitor.

Waiving the cooling off period

The government has provided buyers under the Property, Stock and Business Agents Act 2002 the right to waive the cooling off period. Under the Act, only the buyer has the right to waive the cooling off period following the strict guidelines under that provision. There are only three conditions provided in the Act for which a buyer can waive the cooling off period.

When you want to sign a waiver on the cooling off period, you must give the seller a 66W certificate in compliance to the Conveyancing Act 1919. This certificate must be signed by your legal representative.

Waiving the cooling off period might make your offer more attractive to the seller; however, you should exercise caution before waiving it. Be sure that your conveyancer has already made all the necessary inspections like pest and building inspections. You should also make sure that your finances are ok, which means your loans have been approved. Furthermore, you can not only waive the cooling off period, but you can also reduce or extend it according to you and the seller’s agreement.

Buying a home can be a complicated process with all the legal procedures it has to undergo and the legal documents you need to read and sign. If you are not careful, it can cost you more than you have planned. By having a solicitor to help you in every step of the way, you can get helpful advice what to do every step of the way. And before long, you can have the house you’ve been dreaming of.

Marc Terrano

Marc Terrano is a content marketer manager at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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41 Responses

  1. Default Gravatar
    jasonJune 7, 2017

    if a company buys a house do they get a cooling off period?
    if they cancel the purchase , how much of the deposit do they loose?

    • Staff
      MayJune 8, 2017Staff

      Hi Jason,

      Thank you for your inquiry.

      1. if a company buys a house do they get a cooling off period?
      Yes, corporate bodies (companies) can get a cooling off period when they purchase a residential house. Although please note that the residential land is limited/confined to

      1. land where there are up to 2 places of residence, or
      2. vacant land on which a residence can be lawfully constructed, or
      3. a single community lot or strata unit for residential purposes, but the land area is not greater than 2.5 hectares.

      The purpose of this condition is to protect small companies who buy a property for investment purposes.

      2. if they cancel the purchase, how much of the deposit do they loose?
      Since the rules on cooling off periods differ from one state and territory to another, basically, the possible amount/percentage of sale price a company can lose is listed above. It is best that you also inquire with your solicitor what rules apply in your location.

      Cheers,
      May

  2. Default Gravatar
    misterMay 14, 2016

    Hi there,
    I have signed the contract of sale to buy a property in Victoria. but due to some reasons I cooled off the contract. I signed on 05.05.16 and requested solicitor to cool off on 09.05.16. my solicitor says I am still able to cool off. my solicitor sent them email at 2010 hours. but vendor’s solicitor has been telling me that I cant cool off as it was sent after 8 pm. Plz advise.

    • Staff
      MarcMay 16, 2016Staff

      Hi Mister,
      thanks for the email.

      Unfortunately we can’t provide legal advice regarding this. I would recommend contacting your solicitor or seeking a second opinion to find out what your next steps could be.

      Sorry I couldn’t be of any help,
      Marc.

  3. Default Gravatar
    MoonwalkerApril 17, 2016

    Dear Sir/Madam

    I had an offer accepted for the purchase of a property in Canberra. My lawyer met me for ten minutes and got me to sign the contract and a waiver of a cooling off period without an explanation as to why it was required/no advice was provided on this matter. I was pressurized to sign these documents from my own lawyer. During the interim, the lawyer was also negotiating the conditions of the contract (e.g. is the oven included etc). I was never provided a copy of the contract to review before it was exchanged. I have now entered the cooling off period, but my rights have been taken away from me.

    Could you please advise me as to how I could address this matter with urgency. Thank you

    Moonwalker

    • Staff
      BelindaApril 19, 2016Staff

      Hi Moonwalker,

      Thanks for reaching out. I’m sorry to hear about your situation.

      In the ACT, you have the right to a cooling off period which is five business days once the contracts have been exchanged. If your lawyer did not explain the terms of the contract to you and if they (or the agent) coerced you into signing the contract as you mentioned above, then this is a breach of their duty of care.

      I recommend contacting your lawyer directly to understand why the cooling off period was waived. If you are unable to resolve the matter, then I strongly suggest that you seek independent legal advice to discuss your options.

      The Australian Securities and Investments Commission (ASIC) provide free legal counselling online which you may find useful.

      All the best,
      Belinda

  4. Default Gravatar
    AngeliqueApril 15, 2016

    If a buyer terminates a contract to buy a house without a valid reason months after the contract was signed, how does the seller get compensated? Does the seller have to take that person to court ? This would be out of the question for many people as the lawyer costs of $500/hour,are not affordable. I live in W.A. This is a situation that is causing us an enormous amount of stress at the moment .Would love to hear what you think about this. Thankyou

    • Staff
      BelindaApril 15, 2016Staff

      Hi Angelique,

      Thanks for reaching out, and I’m sorry to hear that this is causing you stress.

      All Australian states and territories have a standard cooling off period for non-auction sales, except for Tasmania (TAS) and Western Australia (WA).

      If a buyer terminates a contract after the contract was signed, then the seller may seek to keep the deposit and the buyer may also have to pay other penalties to the seller. However, if the contract does not proceed for valid reasons, such as if the buyer genuinely could not access finance, then the deposit may be refunded.

      I recommend getting in touch with Western Australian Department of Commerce to discuss your options. The Australian Securities and Investments Commission (ASIC) offers free legal advice which you might find useful.

      Alternatively, you may need to speak to a solicitor or a conveyancer regarding the next steps.

      All the best,
      Belinda

    • Default Gravatar
      AngeliqueApril 15, 2016

      Many thanks for your for input.

  5. Default Gravatar
    RakeshApril 12, 2016

    Hi I am in NSW, I have paid 0.25% of the offer price to selling real estate agent’s Bank Account on 11/04/2016 but on 12/4/16 Seller (owner) rejected my offer and agent informed me by phone and asked my bank details to refund my 0.25% of the property price.
    The entire communication was over the phone.
    because agent informed me over phone I thought it would be best idea to send an email describing relevant details and reason that seller rejected my offer also, requested that refund the money I have paid to my bank account.
    But agent did not respond to my email or SMS. Agent did not gave me any paper/copy of contract documents that I signed while paying 0.25%, Now I am concerned whether I will be able to get my money back or what are the option available to me?

    • Staff
      MarcApril 13, 2016Staff

      Hi Rakesh,
      thanks for the question!

      I would recommend contacting the Real Estate Institute of NSW to explore what options are available to you. Failing this, you might want to contact NSW Fair Trading if the information or resolution isn’t to your satisfaction.

      I hope this helps,
      Marc.

  6. Default Gravatar
    MelMarch 31, 2016

    Hi
    I just signed up the letter contract renting yesterday. And today, which is the next week, my friend and I just negotiated the rent apartment to reduce and the agaent still hold it since I have not receive an acceptanc. Is it cooling-off period? And, I am considering to cancel the contract, should I pay 0.2% from the renting price?

    • Staff
      BelindaApril 4, 2016Staff

      Hi Mel,

      Thanks for getting in touch.

      Please note that the rules surrounding cooling off periods differ depending on the state in which the property is located. However, above you’ll see the duration of the cooling-off period and the amount you may forfeit if you decide to exercise your cooling off right for each state and territory.

      If you decide to rescind the contract within 3 business days since the day you received a copy of the signed contract, and the property is located in Victoria, then you will forfeit 0.2% of the rental price of the property.

      Ensure that you provide a letter or notice of termination to the agent with an explanation for why you are cancelling the contract.

      Please speak with the agent directly, or a solicitor, to understand your options in this situation.

      Thanks,
      Belinda

  7. Default Gravatar
    heverMarch 11, 2016

    We signed up to sale our house at auction yesterday but the block we wanted has just been sold so can we cancel our real estate contract and not go to auction -is there a cooling off period in queenslnd australia

    • Staff
      BelindaMarch 11, 2016Staff

      Hi Hever,

      I’ve sent you an email to follow up with this enquiry.

      Thanks,
      Belinda

  8. Default Gravatar
    SwarnaJune 14, 2015

    I am buying a property. The cooling off period ends at 5.00pm on Monday the 15th July. The lawyer says the searches will be done only after the cooling off period ends .Is this correct ? I am really worried as the lawyer has not started any searches and he is waiting for the cooling off period to end. Your reply will be very much appreciated.

    • Staff
      BelindaJune 15, 2015Staff

      Hi Swarna,

      Thanks for your enquiry and I hope this response reaches you in time.

      I suggest that you revise the “cooling off period” clause in your contract to find out when the searches will take place. However, if you’re lawyer has advised you that they will take place after the cooling off period ends, then I would suggest this is correct.

      Please note on this page you can fill out a form to speak with a conveyancing specialist should you need further clarification.

      Kind regards,
      Belinda

  9. Default Gravatar
    SanjayaJune 9, 2015

    I have put 0.25% deposit for the property which is advertised as additional rental income from the granny flat by seller agent. During cooling off period, I found that granny flat does not have council approval and hence the flat can not be legally rented.
    In such case, can I get refund of 0.25% if I withdraw in the cooling off period?
    If I have to go ahead with the purchase, can I take legal action against the real estate agent?
    I highly appreciate for your suggestions in this regard.
    Thanks.

    • Staff
      BelindaJune 11, 2015Staff

      Hi Sanjaya,

      Thanks for your enquiry.

      finder.com.au is an online comparison service so we can’t provide you with financial or legal advice regarding this situation.

      Depending on which state you live in, the cooling off period is generally 2-5 business days. Generally, cancellation of the contract will incur a penalty of 0.25% of the sale price of the property.

      I would strongly suggest that you revise the “cooling off period” clause in your contract and speak with your agent directly. It may also be necessary for you to seek legal counsel.

      Thanks,
      Belinda

  10. Default Gravatar
    CathyMay 26, 2015

    Having accepted a price for the sale of a property 10 days ago (being a Saturday) and contracts signed by our party 4 days later, building/pest inspection completed and other party’s banks valuation completed when should we expect exchange of contracts. Also when does the cooling off period start and finish. Is it from the acceptance date or from exchange of contracts? We are from NSW but unsure if the waiver was signed.

    • Staff
      BelindaMay 29, 2015Staff

      Hi Cathy,

      Thanks for your enquiry.

      finder.com.au is an online comparison service and we cannot provide you with advice regarding your personal situation.

      When you buy residential property in NSW, there is a 5 business-day cooling-off period after you exchange contracts.

      In regards to the exchange of contracts, please speak with your solicitor.

      Thanks,
      Belinda

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