What happens in the cooling-off period?

First published 17 June 2019, 12:00 PM

Nope, we’re not talking about how to cool down in hot weather, we’re talking about home loans (yay). If you’re not too sure what the cooling-off period means or how it works, keep reading.

What is a cooling-off period?

The cooling-off period is the short time period (usually up to 5 business days) where you can withdraw from purchasing a property without major legal or financial consequences or fees.

That’s why we think it’s so important that you understand how it works and when the cooling-off period applies.

How does the cooling-off period work?

A cooling-off period only applies to a private treaty when you purchase a house, this is not included as part of an auction sale (unless otherwise stated in the terms set by the seller). The period can be up to 5 business days and begins the day you receive your signed copy of the agreement.

From here, you have up until 5pm on the last day of the cooling-off period to change your mind and withdraw from the sale. It’s good to remember that the period begins on a business day, therefore if the contract is signed on a public holiday or a Sunday, these days would not be counted.

A state by state breakdown

That’s right, the cooling-off period isn’t the same across Australia. If you withdraw from the sale and stick to the legal agreement, you may need to pay a percentage of the property price and the remaining deposit will be refunded to you.

States and territories	Cooling-off periods*	Percentage of sale price payable	Potential loss on a $500,000 purchase
NSW	5 business days	0.25%	$1,250
ACT	5 business days	0.25%	$1,250
QLD	5 business days	0.25%	$1,250
VIC	3 business days	0.2%	$1,000
SA	2 business days	Small holding deposit (up to $100)	Up to $100
WA	No cooling-off period (unless chosen to be included in contract)	100%	$500,000
NT	4 business days if the purchaser isn't represented by a conveyancer or solicitor.	Nil	Nil
TAS	No cooling-off period	100%	$500,000

*Information current as at 16^th of March, 2021. Source: https://www.finder.com.au/cooling-off-periods-when-buying-a-house

Changes may also be made to the cooling-off period, such as shortening or extending the period, by written agreement with the seller of the property.

The cooling-off period can also be waived, sometimes known as unconditional contract of sale, which can show your interest in purchasing and may help you secure the purchase over other bidders.

Reasons why you might change your mind

So, why would you need to withdraw after you’ve signed the contract? Here are just a few reasons:

The building and pest inspections have identified issues
A different property you’d prefer to buy has become available
There’s been a change to your financial, or personal, situation
Your home loan hasn’t been approved
You’ve simply changed your mind

How do you withdraw from the sale?

You will need to prepare a letter, which your solicitor or conveyancer can write on your behalf, stating that you are withdrawing from the sale.

The letter is then sent to the seller’s real estate agent via email, fax or mail before 5pm on the last day of the cooling-off period.

Thinking of withdrawing from your sale? Get expert advice from your local broker.

What happens if you want to withdraw after the period ends?

If you decide not to proceed with purchasing the property after the cooling-off period ends, larger fees and consequences could incur. However, this depends on the details included in the contract and can vary greatly between contracts. These fees most likely include compensation to the seller.

Now you know the ins and outs of the cooling-off period when purchasing a property, it’s better to be certain before you finalise a purchase rather than waiting until after the cooling-off period ends.

Preparation is key and it’s best to get your pre-approval from your lender before entering an agreement. Your local Mortgage Choice broker can help you with arranging pre-approval for your home or investment loan.

Whether you’re considering purchasing a property in the near future, or are currently in the process of buying a home and in need of advice, please feel free to contact your local Mortgage Choice broker and they will be happy to assist you.

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