Being spontaneous and making rash decisions can be great – even fun – but maybe not so great when it comes to the property world. If you’ve bought a house only to change your mind thereafter, cooling off periods could be a godsend.
A cooling off period means that, even if you’ve already signed the contract, if within a certain timeframe you change your mind (usually 5 days) you are able to cancel the sale.
Check out your state (or territory) in the table below:
Extensions are usually given in cases where the buyer needs more time to complete checks such as building and pest inspections, building valuations, etc. For example, you might be waiting on the building valuation in order to get your loan officially approved.
If an extension to the cooling off period is granted, a quick phone call or handshake is not good enough. For the extension to the cooling off period to be official, it will need to be in writing from the vendor.
After the cooling off period has passed, you will no longer be able to use the clause to get out of the contract.
If for some reason you do want to get out of the contract after the cooling off period, there is no hard-and-fast rule as to whether this is possible. However, in cases where it is still possible, it will likely be very costly, and you would need to discuss your options with a solicitor. To avoid this, it is advisable to carefully consider any real-estate decisions or purchases you make.
In most cases, if you choose to buy at auction, you will not have a cooling off period. When you buy at an auction (or if you put in a pre-auction bid which is accepted three days or less before the date of the auction) there is no law that says you must have access to a cooling off period.
Given that there is no cooling off period, if you do decide to buy at an auction, make sure you are absolutely sure about your decision.
The vendor does not have access to the cooling off period clause, and it exists only for the buyer. While the vendor would have to cooperate if you requested to get out of the contract during the cooling off period, it does not work both ways. The cooling off period does not mean that the vendor can cancel the sale – it only gives you the chance to cancel buying the property.
If you do choose to cancel the sale, even if it is during the cooling off period in most cases it will not necessarily be a ‘clean break’. Although you will be able to get out of buying the house, depending on the conditions of the contract you would have signed, you will almost always have to pay a penalty to the seller to help compensate for their losses.
The exact penalty for utilising your cooling off period will depend on what state you are buying in. For example, in NSW it is 0.25% of the purchase price. This means that if you were to break a contract on a $600,000 house, you would be $1,500 out of pocket. It may seem like a lot, but in reality, it is a small price to pay compared to an entire mortgage.
Cooling off periods can be waived, even in states where cooling off periods are required, however it all sits in the hands of the buyer – sort of. The cooling off period can be waived with a section 66W certificate which forfeits the buyer from access to their cooling off period. But why would the buyer ever want to do this?
In certain situations, such as if the property market is experiencing a lot of demand for housing but there is not much coming onto the market, the waiving of the cooling off period can be used as an almost ‘bargaining chip’.
In this situation, it might be in the buyer’s best interest to waive the cooling off period in order to make a more attractive offer to the vendor – because after all, why would you want to wait a whole five days to confirm the sale of your property if you didn’t have to?
Some might call this unfair, but it is important to remember that the buyer has control no matter what. If the vendor is pressuring you to agree to a section 66W certificate, you are under no obligation to oblige, although there is no guarantee that if this was the case your offer would be accepted/ It is also likely the vendor would simply move on through the line of buyers until they found one who was happy to agree.
Words by Kathryn Lee