What you should know before accepting an offer on your property
A cooling off period is the number of business days where a property buyer can walk away from a legal agreement to purchase a residential property. Buyers who do this will usually have to pay the seller a small termination fee, which is often around 0.25% of the purchase price of the property. Any deposit above this will commonly need to be refunded.
If you are selling a house you don’t get a cooling off period. Once a vendor has signed the sales contract they’re obliged to go through with it subject to the conditions of the contract.
It’s worth finding out what happens if a buyer decides to break the sale contract during the cooling off period. This guide will help you understand where you stand no matter where in Australia you live.
Do all buyers in Australia get a cooling off period?
All states and territories have a standard cooling off period for non-auction sales except in Tasmania and Western Australia.
Is there always a cooling off period?
There are two major exceptions to mandatory cooling off periods:
- Properties sold at auction have no cooling off period
- For normal house sales, the buyer can sign an agreement that waives their right to a cooling off period (in some states).
Australia-wide cooling off rules
What happens if the buyer breaks during the cooling off period?
Buyer payment to seller if sale is cooled-off
|State||Cooling off period||Sale price paid to cool off|
|ACT||5 business days||0.25%||$1,000|
|NSW||5 business days||0.25%||$1,000|
|NT||4 business days if purchaser isn't represented by a conveyancer or solicitor||Nil||Nil|
|Queensland||5 business days||0.25%||$1,000|
|SA||2 business days||Small holding deposit is forfeited (up to $100)||$100|
|Tasmania||None||100%||$400,000 (sale must proceed)|
|Victoria||3 Business days. Cooling off period doesn’t apply if 3 days before or after a Public Auction. Industrial/Commercial and farms can be exempt.||0.2%||0.2%|
|WA||None||100%||$400,000 (sale must proceed)|
- Do sellers get a cooling off period on sales?
No, a cooling off period is only for the buyer and not the seller. Once a vendor (the seller) has signed the sale contract, they cannot back out of that sale.
- Can buyers pull out of a property sale when the cooling off period ends?
No, buyers must go through with the purchase on the terms of the contract after the cooling off period.
- What is considered a business day?
A business day is Monday-Friday, not including the weekend or public holidays. A business day ends at 5PM in the world of home sale contracts.
If you hand in your signed notice that you'd like to use your cooling off rights after 5PM on the last day of the cooling off period, you'll be too late.
Agency cooling off period for sellers (NSW only)
Sellers who enter an agreement with their real estate agent to sell their property have a one day cooling off period (including Saturday) in NSW to exit that agreement with the agent.To take up the cooling off period, the seller must give the agent a 'notice of rescission' signed by all clients by 5PM on the one day of cooling off.
Extra general information
Cancelling a real estate agent listing
If you’re unsatisfied with your real estate agent and you’d like to suspend the listing agreement, most agents are willing to cooperate if you provide a sufficient reason.
How to cancel a real estate agent listing
If you’ve decided to withdraw a real estate agent listing, you will need to ask your agent directly to cancel your listing agreement. Make sure you have the right to cancel the listing by enquiring about this when first signing the contract.
- Re-visit listing agreement. Most listing agreements will include a clause that allows you to cancel the contract without penalty given that the real estate agent agrees to the contract suspension. Be cautious of a listing contract that omits a clause that allows you to withdraw from the listing and keep in mind that some contracts may outline that the agent will still be paid commission even when the contract is cancelled. This is because the agent may be out of pocket for any advertising costs that have already been incurred.
- Contact your agent. You’ll need to speak with your agent directly to notify them of the reason for cancelling the listing. If your real estate agent won’t agree to cancel the listing, you’ll need to request a cancellation from the general manager of the agency. Typically real estate agents will cancel the listing upon your request as they want to uphold their reputation. However, in the event that the general manager refuses to cancel the listing, you should seek legal advice from a solicitor that specialises in property legislation. They will be able to facilitate the process on your behalf so you can terminate the contract effectively.
- Follow up with agent. After you’ve made initial contact with the agent, it’s a good idea to follow up to ensure that the listing has been officially terminated and your property is no longer on the market.
Conveyancing and the cooling off period
Conveyancing is the transfer of ownership from one person to the other, that is, from the seller to the buyer. However, before the exchange happens, it has to undergo certain stages, one of which is the cooling off period. The cooling off period happens the day there is an exchange of contracts, provided that it falls under a business day and ends at 5PM on the fifth business day. However, if a property is acquired through an auction, the cooling off period does not apply. During the cooling off period, both parties have the right to cancel the contract. If this happens, a penalty will be incurred from the person who cancels the contract. If the cooling off period ends and neither you nor the buyer expressed any intention to cancel, you will be legally bound to the contract.
Can a vendor pull out of a contract?
If you sign a contract to sell your house but then get cold feet, either during or after the buyer’s cooling-off period, there’s little you can do. There is no cooling-off period for sellers in Australia. Once contracts have been signed and exchanged, you are locked into the sale of your property under the terms you have agreed to.
As you will then be legally obliged to go through with the sale, it’s essential that you’re certain that you want to sell your home before you sign anything.
If you want to back out of a contract after it's been signed, you'll need to speak to a solicitor regarding your options.
Clear business days defined
The cooling off period is effective when the property is acquired through a private treaty. This period is usually five clear business days long. However, the cooling off period can be extended or shortened, depending on the agreement of both parties.
Clear business days, in conveyancing, refer to regular business days including Saturday. Thus, if the exchange of contract happens on a Sunday or a holiday, the cooling off period will commence the next day and will end after five days at 5PM.
What happens during the cooling off period?
The cooling off period is, in theory, a grace period for the buyer to evaluate if the property is the right one for them. It also gives you time to re-think if the financing you’ve got will complement your budget. If you changed your mind and cancel the contract during the cooling off period, there is nothing that the seller can do. There is a provision, though, to compensate for the fees and effort done.
If a buyer decides to terminate the contract, he will have to pay a penalty equivalent to 0.25% of the property’s purchase price. Thus, if the property costs 300,000, the penalty will be $750. The seller, will then refund the deposit to the buyer within 14 days, but may deduct the penalty from the amount. When the buyer decides to cancel the contract, he should give a letter of cancellation to the agent informing him about the cancellation. This letter can be handed personally, or mailed to the agent’s business address.
Waiving the cooling off period
Waiving off the cooling period is possible as long as the property is not sold through an auction. This provision is under the Property, Stock and Business Agents Act 2002 which gives the buyers the right to waive the cooling off period. Waiving the cooling off period must happen one business day before the contract is signed. If the buyer decides to waive the cooling off period, he should also sign the Office of Fair Trading waiver form first before signing the contract or agreement. This certificate is called the 66W certificate. This certificate must be given to the seller, or to the seller’s agent stating that the lawyer is acting independently from the seller, that he will not gain any benefit or profit and that he has informed the buyer about the impact and effect of waiving the cooling off period.
No cooling off period situations
The cooling off period allows the buyer to do further research and inquiries or change their mind during the cooling off period. However, there are cases which the cooling period does not apply. The most well known of these is when a property is sold at an auction. After a property is sold, the exchange of contracts takes place immediately leaving no time for a cooling off period. The Conveyancing Act 1919, Section 66T states that a cooling off period does not only apply in situations where the client or buyer gives you prior to the exchange of contracts a 66W certificate which states that he is waiving the cooling off period. The Act also states that there is no cooling off period if the contract is made the same day as the property was put up for sale in an auction. Another situation that may nullify the cooling off period is when you consulted a lawyer before the signing.
The Conveyancing Act 1919, Section 66T states that a cooling off period does not only apply in situations where the client or buyer gives you prior to the exchange of contracts a 66W certificate which states that he is waiving the cooling off period. The Act also states that there is no cooling off period if the contract is made the same day as the property was put up for sale in an auction. Another situation that may nullify the cooling off period is when you consulted a lawyer before the signing of contract. The conveyancing process is often different from state to state. Therefore, it is better to ask your solicitor to give you light how conveyancing is done in the area where you live. It is imperative that you know and exercise your rights when dealing with legal matters such as conveyancing.
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