Buying a property is one of the biggest financial decisions most of us will ever make. It can be exciting, nerve-wracking and, at times, overwhelming. But what happens if you sign a contract to purchase a home or property and then, a few days later, have second thoughts? This is where the cooling off period can become your best friend.
Understanding your rights during this period is crucial to making informed decisions and avoiding costly mistakes. Let’s break it all down.
What is a cooling off period?
A cooling off period is a set period of time after you sign a contract to buy a property in which you can change your mind and withdraw from the purchase without facing the full financial consequences of breaking the agreement.
There are plenty of reasons you might change your mind about buying a property after signing the contract, such as:
- A building and pest inspection uncovers unexpected issues.
- Your finance isn’t approved by the lender.
- Your financial situation changes.
- Another property catches your eye.
- New information pops up, like a development that could block your dream view.
Life happens and it’s okay to reassess. Cooling off periods exist to give you breathing room to make the best decision for you.
How long is the cooling off period?
The length of the cooling off period varies depending on the location of the property you’re purchasing. In Victoria, the cooling off period is 3 business days beginning from the date you sign the contract (not when your offer is accepted). It’s also important to note that your cooling off period still begins even if your vendor hasn’t signed the contract.
If you’re purchasing a property in other states, keep these time periods in mind. However, always double check with local laws before you sign the dotted line because they may have changed since we published this blog!
- NSW: 5 business days
- QLD: 5 business days
- SA: 2 business days
- ACT: 5 business days
- NT: 4 business days
- TAS: No statutory cooling off period
We recommend marking the final date of your cooling off period on your calendar to ensure you don’t miss it!
Are there any costs involved with the cooling off period?
Unfortunately, exercising your rights to a cooling off period does incur a cost. In Victoria, the seller can keep 0.2% of the purchase price or $100 (whichever is greater) as a penalty for pulling out. While it can sting to lose a small amount of money, it’s often far better than being locked into a property purchase you’re likely to regret later.
This changes state to state, so please check the local laws of the property for up-to-date information.
When am I not entitled to a cooling off period?
While the cooling off period is a safety net for buyers, it doesn’t apply in every situation. Here are the key exceptions:
- The property was purchased at a public auction or within three clear business days before or after a public auction.
- The property is used mainly for industrial or commercial purposes.
- The property is more than 20 hectares and used mainly for farming.
- You previously signed a contract for the same property with the same terms.
- The buyer is an estate agent or corporate body.
How can I exercise my right to a cooling off period?
If you decide to withdraw from the contract, you must notify the seller in writing. We recommend this is done through your conveyancer so they can ensure the notice is properly drafted and delivered within the cooling off period.
Timing is everything. If you miss the deadline, you could be legally bound to complete the purchase, so act quick if you have doubts.
Things to consider before backing out
Choosing to withdraw from a property contract is a big decision. Here are a few things to keep in mind:
Understand the financial implications: While the cooling off period protects you from major financial loss, you may still forfeit part of your deposit. Weigh up whether this is a reasonable trade-off for avoiding a potentially poor investment.
Consider alternative solutions: If concerns have arisen about the property, consider whether they can be resolved. For instance, negotiating repairs or adjusting the price might be an option.
Talk to your conveyancer: Speak with your conveyancer before making any final decisions. They can clarify your rights and help you navigate the process.
Evaluate long-term suitability: Consider whether your concerns are short-term or if this property is genuinely not right for you and your future plans.
How can a conveyancer at Waters Lawyers help?
Buying a property should feel right. Whether you need advice on withdrawing from a contract, understanding your obligations or simply want peace of mind throughout the entire buying process, our experienced team are here to help. We’ll explain your rights, ensure you meet all legal requirements and handle the paperwork so you can focus on finding your perfect home.
Get in touch today by calling (03) 5996 1600 or completing the enquiry form here.
