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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When purchasing a property, is it ok to agree to waive the cooling off period if it is requested by the vendor?
Hello,
thanks for the question!
This question is best suited to a conveyancer or solicitor. They’ll be able to assist you in regards to this matter.
Cheers,
Marc.