| How cooling off periods work
A cooling off period starts on the day you sign the contract and is usually five business days from this date.
NOTE: There are different regulations in different states. Please be sure to do your state specific research.
What is a Cooling Off Period?
A cooling off period is exactly that. Time for a buyer make sure they want to go ahead. If you change your mind about buying a property during this cooling off period, you can cancel the contact.
Although as a buyer you can decide to pull out, it will cost you to do so. You will be charged a percentage of sale price approx. 0.25% of the total sales price. For example if the property sells for $1m the penalty will be around $2,500.
This penalty is paid to the seller to compensate for their losses.
Cooling off periods only apply to a private settlement (or private treaty) when buying a house, not through an auction.
What Steps are Involved
1 – You must receive a copy of the unsigned contract at least one business day before the agreement is signed from the agent responsible for the sale.
2 – At the same time, they must provide you with the relevant state consumer guide regarding agreements.
3 – As the client (you) must sign the waiver form approved by the Office of Fair Trading before signing the agreement.
As a general rule for house purchases you get a 5 business day cooling off period
This starts the day you received a copy of the signed contract and ends at 5PM 5 business days later. This does not include weekends or public holidays. As proof when the cooling off period starts, you should ask for a time/dated receipt of delivery of the contract.
During the cooling off period, get your conveyancer to do check and reports to ensure there are no problems.
You only have the option to terminate or cancel the agreement during this cooling off period.
If you decide to back out of the contract after the end of the
cooling-off period – It is likely to be very expensive with a lot of headaches.
This is something you will need good legal advice for.
Rescinding the Agreement
If you decided to rescind the agreement. You must do this with in the cooling off period. You will need to write a letter/notice of termination to the real estate agent that you are cancelling the contract.
As this letter must be rendered before the end of the cooling off period (not after as you will then be bound by the contract) – It is advised that you require a receipt of delivery from the agent, so there can be no discrepancies regarding the timing.