How does the cooling off period differ from state to state?
Understand how the cooling off period differs across each state in Australia.
So, you’ve finally found a home, submitted an offer and it’s been approved. But something crops up just after you’ve signed the contract which means you’re not able to go ahead with the sale. This is where the cooling off period could come in handy.
What is a cooling off period?
A cooling off period is a designated period of time where you as the buyer can withdraw from purchasing the property without any major legal or financial consequences. Essentially, the cooling off period provides you with a bit of breathing space to reflect on the terms of the contract and pull out if you change your mind. But you might not decide to pull the plug completely. You might just choose to change the terms of the contract if you’re not 100% happy with the conditions.
While you can pull out of the contract during the cooling off period, you might be charged a forfeit fee that’s deducted from your deposit, so it’s not a decision to be made lightly. It’s also worth noting that cooling off periods are generally only available for properties sold by private treaty. Houses sold at auction aren’t usually subject to a cooling off period. And another thing, the cooling off period only applies to the buyer, not the seller.
How does the cooling off period work?
The cooling off period usually starts when you, the buyer, receive a copy of the contract of sale that’s been signed by both parties. The cooling off period tends to expire at 5pm on the final business day of the cooling off period. If you choose to withdraw from the sale during the cooling off period, you could be subject to a termination or forfeit fee.
If you decide to withdraw from the contract during the cooling off period, you’ll need to notify the seller’s real estate agent in writing before 5pm on the final day of the cooling off period. You can ask your solicitor or conveyancer to write them a letter on your behalf. They should also be aware of the specific requirements regarding the cooling off period in your state or territory.
Reasons to withdraw from the sale during the cooling off period
Although it might be difficult to imagine backing out of a sale, there are a few instances where the cooling off period could come in handy, including:
- Issues with the building and pest inspection: if the building and pest inspection uncover serious issues, you might choose to withdraw from the sale. With that said, it’s fairly common to have a separate conditional building and pest inspection clause in your contract.
- Finance falls through: if you’re not able to secure finance during the cooling off period, you might choose to pull out of the sale. Again, it’s common practice to include a separate conditional finance clause in your contract in the event your finance is rejected.
- Unexpected changes: from unexpected changes to your financial situation to developments in your personal life, sometimes unforeseen circumstances arise which mean you’re no longer able to fulfil your obligations when it comes to buying a property.
- New information: during the cooling off period, you might come across new information, like planned infrastructure or housing developments in the area, that may make the property undesirable.
- Change of mind: sometimes all it takes is a simple change of mind during the cooling off period to cause the sale to fall through. In some instances, you might find another property that’s a better fit for you or you no longer find the current property appealing.
How long is the cooling off period?
The length of the cooling off period and the fees that apply depend on the state or territory. Here’s a quick breakdown of the different rules across the country.
Queensland
The buyer is entitled to a cooling off period in QLD of 5 business days. If the buyer chooses to withdraw during this time, the seller can charge a forfeit fee of 0.25% of the purchase price. The cooling off period can be extended, shortened or waived entirely if both the buyer and seller agree in writing.
New South Wales
When it comes to the cooling off period in NSW, the rules are much the same as in Queensland. Buyers have five business days to decide and are subject to a 0.25% forfeit fee if they pull out. Once again, the cooling off period can be amended if both parties agree to it in writing.
Australian Capital Territory
In the ACT, the buyer is entitled to a cooling off period of 5 business days and is subject to a forfeit fee of 0.25% of the purchase price. Similarly to QLD and NSW, the cooling off period can be amended if both parties provide written agreement.
Victoria
Buyers in Victoria are entitled to a cooling off period of 3 business days. If they choose not to proceed with the sale during this time, the buyer is entitled to a full refund of their deposit less a termination fee of $100 or 0.20% of the purchase price (whichever is greater).
South Australia
In SA, the cooling off period is 2 business days. This cooling off period starts either after the contract date or upon receiving the Form 1 Vendor Statement, whichever is the later. Rather than being charged a forfeit fee, a $100 penalty is taken from the deposit.
Tasmania
Tasmania doesn’t recognise a mandatory cooling off period. Instead, once the contract has been signed, both parties are locked in. If you do want to include a cooling off period, you’ll have to ask your solicitor or conveyancer to include a clause in your contract.
Western Australia
In WA, there’s no mandatory cooling off period, but you can request that one be included by your solicitor or conveyancer in the contract.
Northern Territory
Buyers in the NT are entitled to a cooling off period of 4 business days. They’re not subject to a forfeit fee and the cooling off period can be changed if both parties agree.
It’s important to check Fair Trading or Real Estate Institute website in your state or territory for the latest updates.
Keen to learn more about the home buying process? Unloan has you covered with a huge range of resources covering everything you need to know about buying a home.
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Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
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*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
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Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
