A cooling off period is a set number of days after you purchase a property during which you can cancel the transaction. It’s an important safeguard in the home-buying process, but the rules are very different depending on where in Australia you live. It’s a good idea to know how it works in your state or territory, even if you don’t plan on using it.
Fortunately, most states and territories in Australia have cooling off periods for property sales (although not if you buy at auction). This recognises the fact that home buying is a long-term commitment, a significant financial investment and often an emotionally charged decision. The laws differ from state to state, however, so it’s important you do your research and understand which laws apply to you.
What is the law state by state?
New South Wales, Queensland and the ACT
In New South Wales, Queensland and the ACT you have five business days to back out of a signed contract. You will have to pay 0.25% of the purchase price as a termination fee, which means you’ll pay $250 for every $100,000.
In Victoria, there is a three-day cooling off period, and a termination fee of either $100 or 0.20% of the purchase price, whichever is greater.
In the Northern Territory, the cooling off period is four working days and no termination fee is required.
In South Australia, the cooling off period is two business days and you have to forfeit a small holding deposit of less than $100 if you terminate the contract.
Tasmania and Western Australia
There is no cooling off period in Tasmania or Western Australia. Once you sign the sale contract you are legally bound to follow through with the sale.
Auctions are different
No matter where you live in Australia, cooling off periods don’t apply for properties sold at auction. Through a regular sale of a property you can also agree to waive the cooling off period after you consult with a solicitor and obtain the relevant legal documentation for your state or territory.
You might choose to waive the cooling off period if you are 100% confident in your choice to purchase the property, and want to speed up the process of transferring the ownership of the house from the seller to yourself. Waiving your option might even help you beat out a competitor offer.
Why would I use the cooling off period?
Buying a house is a huge financial commitment and unfortunately things can and do go wrong. After you’ve signed the sale contract, a building and pest inspection might uncover property damage that you weren’t aware of prior to the sale, or your home loan application might be denied. The cooling off period exists to offer you protection in case something goes wrong.
Get the right advice
Before you purchase a home, whether or not you think you will need the cooling off period, you should consult with your mortgage broker or a solicitor for the most comprehensive and up-to-date information.
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