In many states in Australia, there is a period after you have your offer accepted, whereby you can pull out of the transaction.
This period is known as the cooling-off period and it has been put in place to help buyers, who are more often than not, making a large and emotional decision.
While the ability to step back from the transaction is there during the cooling off period, it is not always without a cost involved, so it’s important to understand how the process works in your state and also the terms and costs involved.
Once the cooling off period ends, the contract will effectively become unconditional, notwithstanding any of the other conditions that might have been put in place.
While a cooling off period is a safety net of sorts, it shouldn’t be relied upon to get you out of jail.
It’s also worth noting that there are no cooling off periods when a property is bought at auction as this is also considered an unconditional sale.
However, as we know in real estate, there is never a one size fits all approach and it is important to understand that generally speaking, all terms that you might put on a contract are negotiable.
A better way to buy property, that can give you some flexibility might be to use a due diligence clause. A due diligence clause is similar to a cooling off period, however, the buyer is in full control and the time period is flexible and based on what both parties agree to.
It will allow you to check over any details about the property, while still being able to walk away if they are unsuitable. The property is locked up under contract and the buyer has the right to proceed with the purchase and withdraw.
Using a due diligence contract is a better way to protect yourself, rather than relying on a cooling off period and there is normally no cost involved.
Similarly, one of the main reasons a buyer might not wish to continue with a purchase after signing a contract is because of finance.
In this type of situation, a buyer should have already spoken to their mortgage broker and gone through the process of obtaining a pre-approval. A pre-approval will mean that you understand your limitations as a borrower and have also received a strong indication that you will be able to finance a purchase and to what price level.
Once the pre-approval is in place, not only will that make your offer stronger, it will also give you less need to withdraw from a transaction by way of the cooling off period.
The cooling off period differs in every state in Australia and notably, Tasmania and Western Australia don’t have a cooling off period at all.
In most instances, if you choose to withdraw from the transaction, you as the buyer will be liable to pay the seller a set fee.
In New South Wales, you get five business days, however, expect to pay the seller 0.25 per cent of the sales price.
In Queensland, you also get five business days and have to pay the same 0.25 per cent fee.
Victorian’s get a three-business-day cooling-off period and the termination fee is a little lower at 0.25 per cent.
South Australian’s have only two business days, but only lose a $100 holding deposit.
The ACT is the same as both NSW and Victoria, with five business days and the termination fee is 0.25 per cent of the purchase price.
In the Northern Territory, there is a cooling-off period of four business days, however, no termination fee is payable.
There’s no cooling-off period in Tasmania and Western Australia.
If you need to speak to an expert to find out more on how a cooling off period works and how this would apply to your situation, you can speak to us by completing a Free Assessment Form and get started on your property purchase journey today.