Understanding cooling-off periods

Buying real estate can be an emotionally charged process. If you’re buying your first property or feel under pressure, it can be an even more emotional experience and you can make serious mistakes. That’s why most Australian states and territories allow a cooling-off period after a sale is completed. Before you breathe a sigh of relief, though, you need to understand more about it.

What is the cooling-off period?

A cooling-off period is a set number of days after you make a purchase in which you can say, “Thanks, but no thanks. I want to cancel my transaction.” If you take the option to cancel your legal agreement, you may have to pay the seller a termination fee, but in some circumstances, it can be worth paying the price.

The cooling-off period is not available everywhere or under every circumstance.

• There is no cooling-off period for properties purchased at auction.
• Tasmania does not recognise cooling-off periods.
• You can elect to waive your right to a cooling-off period.

Cooling-off rules state by state

The legal rules for the cooling-off period vary in different states and territories as follows.

• In New South Wales, you have five business days to back out of a contract you have already signed. You will have to pay the seller a termination fee of 0.25 per cent of the purchase price.
• In Queensland, the rules are the same as in New South Wales: five business days and a 0.25 per cent fee.
• Victoria allows a three-business-day cooling-off period and the termination fee is 0.20 per cent.
• In the Northern Territory, the cooling-off period is four working days and no termination fee is required.
• In South Australia, you are only given two business days to back out of a contract and must forfeit a small holding deposit of up to $100.
• In the Australian Capital Territory, the cooling-off period is five business days and the termination fee is 0.25 per cent of the purchase price.

As mentioned, the cooling-off period does not exist in Tasmania.

Using your cooling-off period

Usually, your financial circumstances won’t take a drastic turn for the worse during the short window of opportunity for cooling off. In most cases, buyers will make use of their cooling-off period when they have a niggling feeling that something is not right or that they’ve forgotten to do something. One might decide to hire a building or pest inspector to set their mind at ease. Another might overlook getting pre-purchase loan approval from their lending institution and have their loan application turned down or delayed.

It’s better to be certain before you finalise a purchase rather than after. It’s prudent to get a pre-purchase building inspection, and always get pre-purchase approval from your lender. Avoid the seven mistakes first-home buyers make and you won’t need to use your cooling-off period.