During the cooling-off period, the buyer has the chance to rethink their decision and – if necessary – decide against buying.
The real estate cooling-off period is a specific length of time that starts once the buyer has signed the final contract. The cooling-off period usually lasts five business days, but it can vary depending on the state of purchase. Also, some states don’t have a set cooling-off period. In such situations, you will need to speak to your solicitors for legal advice about local regulations. There are two significant caveats to the cooling-off period: for one, they usually do not apply on property bought at auction. However, with the agreement of both you and the seller, you can negotiate a contract to include a cooling-off period for a home you bought at an auction. Additionally, cooling-off periods are generally only available for the buyer, not the sellers, though exceptions do exist.
The real estate cooling-off period is essentially a short window of time during which the buyer has a chance to reconsider their decision. While withdrawing does result in some financial penalties, the amount you must pay should you decide against going forward with the sale is minimal - usually a percentage between 0.2 to 0.25 of the purchase price. Like the length of the period, this percentage varies according to state. The cooling-off period exists to allow buyers to complete valuations and final property checks that may still be pending. Should they discover a discrepancy in the property, they can then back out from the sale. Additionally, sometimes the financing falls through at the last minute, and financial situations change. The cooling-off period ensures that buyers are not bound to make a purchase that they may no longer be able to afford. As previously mentioned, states and localities usually have set cooling-off periods. However, if a buyer needs longer to complete their final inspections, it is possible to extend this period. The decision to provide an extension rests entirely in the hands of the seller. Should the seller choose to extend the agreement, the buyer and his real estate agent must make sure to get this new agreement in writing.
During the cooling-off period, the buyer is allowed the chance to reappraise their purchase. If you have signed your contract and are currently in the cooling-off period, there are several steps you can take to ensure that you’re ready to go ahead with your purchase. These include:
Reconfirm to make sure your mortgage is approved, and you do not have to worry about the situation changing. Double-check your finances with your lender or your bank – this will help protect you in the case of an unexpected and unanticipated change in your financial circumstances.
Confirm that the property has passed its pest inspection and that there are no ground issues that may be a concern down the line. Double-check all inspection reports to make sure you have not missed a significant problem.
Speak to your real estate agent to confirm that the property’s circumstances remain the same. For example, if a new development that would hinder your expected ocean view is announced, you may decide to back out of the contract.Double-check other properties you were considering. If an option you prefer better than the one you’re buying has become available, the cooling-off period offers you the opportunity to back out with minimal penalties.
In general, the length of the cooling-off periods mandated by the law is as follows:
Location | Cooling off period |
|---|---|
Queensland | 5 days |
Victoria | 3 days |
Western Australia | No required cooling-off period, though you may add a clause in the contract of sale. |
New South Wales | Buyers have five business days to rethink their decision and make sure all checks are in order. |
Australian Capital Territory | 5 business days |
Northern Territory | 4 business days |
South Australia | 2 business days |
Tasmania | While parties can add an allowance in the contract of sale, there is no legally mandated cooling-off period. |
Buyers confident about their purchase can waive the cooling-off period. It is crucial to keep in mind only the buyer can waive this period, not the seller. Should you wish to waive the cooling-off period, you will have to provide the vendor’s real estate agent (or the seller directly) with a document signed by a legal advisor. Keep in mind that while waiving this requirement can make it more likely that the seller will accept your offer, it should only be done if you have already completed all the required inspections (including pest inspections) and financial checks. Alternatively, it is possible to offer a shortened cooling-off period if you only have a few details left to confirm. This helps make your offer more attractive to the seller while you still have the safety of knowing you can back out from the sale without major financial repercussions.
At the end of the cooling-off period, you will move into the settlement period. During this period, the buyer and the seller will complete and finalise the contract of sale. It involves a significant amount of work on the part of solicitors, including checking details such as planning permissions, conditions, zoning, and boundaries, among others. The length of the settlement period depends on the amount of work that needs to be done, though it usually takes about six weeks. At the end of this period, on the settlement day, the property is legally transferred to the buyer and keys are turned over. Buyers can pull out of a contract during this period as well. However, unlike pulling out during the cooling-off period, pulling out once it is over can often result in significant financial penalties. These fees will be detailed in the contract of sale and usually include compensation for the seller. A clear understanding of the real estate cooling-off period makes purchasing a property significantly easier. You have the confidence of knowing you have the protection offered by this period, allowing you to make a more confident offer. However, it’s always better to be certain about your purchase when you put in the offer, as it allows you to purchase a home far faster.