Expert Advice with Ahmad Imam 14/03/2018
If you’re in the market to buy property, you may have heard the term "cooling off period" thrown about.
In a nutshell, the cooling-off period refers to the time during which you as the buyer may change their mind about a property purchase.
Cooling-off periods only apply to buyers, not sellers – once a vendor has signed the sale contract, there’s no easy exit ramp!
Properties sold at auction generally do not have cooling-off periods.
And it’s possible in some cases to have mandatory cooling-off periods waived, if both buyer and seller agree – your local agent or buyer’s advocate can advise you on the nitty-gritty of how to do this.
The laws surrounding cooling-off periods vary from state to state, which can make it quite confusing, so here’s the lowdown on how cooling-off periods work across the country…
New South Wales
In NSW, you’ll have five business days to change your mind if you’ve bought a property via private treaty, and if you decide to cancel the contract, you’ll need to pay the vendor 0.25% of the sale price as a penalty.
The cooling-off period begins the minute you sign exchange contracts, and expires at 5pm on the fifth day thereafter.
If you’d like to waive the cooling-off period, you’ll need to give the vendor a “66W certificate”, signed by your solicitor or conveyancer.
You can also reduce or extend the cooling-off period by written agreement with the vendor.
In Victoria, properties sold by private sale are covered by a cooling-off period of three business days.
However, if you buy a home three days before or after a public auction, the cooling-off period does not apply – worth keeping in mind if you put in an offer on a property after it’s been passed-in.
If you change your mind during the cooling-off period, you’ll need to give written notice, and will be liable to pay 0.2% of the purchase price or $100, whichever is greater.
Industrial, commercial and farming properties larger than 20 hectares are not covered by a cooling-off period.
In SA, the cooling-off period is a mere two days, during which you can give written notice to the vendor if you change your mind.
The penalty payable for backing out of the purchase is simply a forfeiture of your holding deposit, up to $100.
Cooling-off periods don’t apply for the sale of non-residential land, and special rules apply if the sale is by tender.
Like NSW, property purchased in Queensland is subject to a five-day cooling-off period, and the penalty for cancelling the contract is 0.25%.
The cooling-off period commences on the day the buyer receives a copy of the signed contract, or on the next business day if this is a weekend or public holiday, and ends at 5pm on the fifth day.
If you buy a property before 5pm on the second business day following an unsuccessful auction, you’re not entitled to a cooling-off period.
The cooling-off period can be waived or shortened by putting it in writing to the vendor.
You won’t need to pay a fee if you change your mind on a property purchase in the Top End, as you can cancel the sale without penalty or explanation within four business days.
This period begins on the day that the contract is last signed by yourself or the seller, and exchanged, and you can negotiate to waive, reduce or extend the cooling-off period with the seller if you wish.
There is no cooling-off period at all for homes purchased in Tassie – so you’ll be legally obliged to pay the full sales price of the property if you signed an unconditional contact, regardless of whether you’ve bought via auction or private sale.
Many mainland investors have been caught out by this discrepancy between laws, so tread carefully!
You’d better be surer than sure before you sign a contract of sale in WA – like Tassie, there is no cooling-off period, so changing your mind is simply not an option.
At the end of the day, the cooling off period is really an opportunity for buyers to back out of a deal after they’ve gone home, thought about what they saw during the open inspections, got cold feet, and changed their mind.
All of this is to say: it can be an excellent bargaining tool.
If you’re an investor who has done your research, completed your due diligence and your finance is ready to go, then making an offer with “no cooling off period” could give your offer extra appeal.
So it's definitely something to consider next time you’re looking for that extra "something’" to get the competitive edge!
Ahmad Imam is the Senior Property Strategist at Metropole Properties in Sydney, is a highly skilled wealth strategist and a passionate property investor. He has a degree in Commerce, is a licensed estate agent and a qualified property investment advisor and has personally coached and educated hundreds of clients to create wealth through property.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
Do you have more than $200k in your super fund? You could use your super to buy property - Find out how