When buying a property, there's a critical stage after you sign the contract called the 'cooling off period'. This is where you can cancel the sale for any reason you like – despite the fact you've signed a legally binding contract to purchase the property.
If you decide to walk away from the property within the cooling off period, cancelling the contract may incur a financial penalty, generally equivalent to 0.20% to 0.25% of the final sale price of the property.
Cooling off periods only apply to a private settlement (or private treaty) when buying a house.
They do not apply when you're buying a property through an auction. However, if the seller and buyer personally negotiate the contract after the auction, a cooling off period may apply.
The rules regarding cooling off periods can vary between states and territories, with WA and Tasmania having no cooling off period whatsoever.
You can get an idea of the differences between states below:
State | Cooling off period | Percentage of sale price you forfeit | |
|---|---|---|---|
| ACT | 5 business days | 0.25% | $1,250 |
| NT | 4 business days | 0 | Nil |
| NSW | 5 business days | 0.25% | $1,250 |
Queensland | 5 business days | 0.25% | $1,250 |
SA | 2 business days | Small holding deposit is forfeited (up to $100) | $100 |
Victoria | 3 business days | $100 or 0.20% (whichever is greater) | $1000 |
WA | Nothing mandated by law, but you can add a clause in your contract | 100% | $500,000 |
Tasmania | Nothing mandated by law, but you can add a clause in your contract | 100% | $500,000 |
The cooling off period when buying a house can go up to 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.
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 period that your solicitor or conveyancer should make enquiries to detect any problems with the property. These enquiries may include a building and survey report, or the certificate of compliance secured from the local office. If there are any problems, you can use the cooling off period 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. You do not need to give any explanation 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 3 ways 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.
As the seller, 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.
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.
As the buyer, you can choose to waive or shorten the cooling-off period. You will need to put this in writing and clearly state:
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.
"Don't ever be pressured into waiving the cooling off period by the agent or the seller. This can happen when there are known but undisclosed problems with the house. You might think it's OK to waive the cooling off period at the time, but you'll probably come to regret it. Pressure to waive the cooling off period is almost never a good sign."
John is the co-host of the this is money and this is property podcasts (formerly my millennial money and my millennial property). He is Director at SOLVERE Wealth, Director/Buyers Agent at Envisage Property, and is property coach of over 25 years.
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We have exchanged contracts with a five day cooling off period in nsw. The cooling off period ends on 24/2/2015 and our conveyances has informed us in writing that the finance clause ( which we didn’t agree on ) expires on the 27/2/2015. In the meantime we also have been subjected to pool inspection and possible other electrical, plumbing, and conveyor and whatever else they please . We only agreed on a price reduction on sale of 10000 for a hassle free sale. What are our rights as the seller
Hi Poppi,
Thanks for your question.
Generally the seller is locked into the contract and cannot withdraw from the sale.
If the buyer finds that for any reason he or she does not want to proceed with the purchase they can withdraw from the contract within the five day period.
You should consult your conveyancer and your estate agent regarding your rights as a seller.
All the best,
Shirley
how many day s grace do you have after signing land settlement?
im in perth how many days do i have to change my mind
Hi Sharai,
Thanks for your question.
It is not required by WA law that contracts for the purchase of property contain a cooling-off period.
If your contract does not include a cooling off period, you won’t be able to get out of a contract to buy a property due to a change your mind.
Cheers,
Shirley
Do seller gets a 5 days cooling off period too? (QLD)
Hi Jocelyn,
Thanks for your question.
Unfortunately a cooling off period is only for the buyer and not the seller. For more information, please get in touch with your agent.
Cheers,
Shirley
Hi, I am looking at purchase of a home, my finance is not yet approved due to paperwork we are waiting for from the ATO. this will take another 2 weeks. The real estate agent wants a .25% deposit with a 10 day cooling off period, but this will not be long enough for our finance. what do we do?
Hello Peter,
thanks for the question.
Unfortunately I’m not able to give personal advice. Generally speaking, a couple of options would include speaking to the ATO to see if the paperwork can be fast tracked, or speaking to the real estate agent to let them know of the situation.
I hope this helps,
Marc.
When the cooling of period starts does it matter that I will be in Fiji for 5 days ?
Hello Jess,
thanks for the question.
There’s nothing on the NSW Fair Trading website which indicates that you need to be in the country when the cooling-off period begins, but you do need to submit a written notice if you want to use your cooling-off period rights, so keep this in mind. For more information please call the relevant Fair Trading office in your state.
Cheers,
Marc.