Add CategoryIf you’re about to sign a contract to buy a property, it’s vital to understand how a cooling-off period could apply to your purchase.
If you've signed a contract to purchase a property and find yourself having second thoughts or your circumstances suddenly change, all is not lost.
Many Australian states and territories enforce a cooling-off period that could allow you to pull out of a real estate contract without penalty, or with a relatively small penalty.
But, beware, not all states and territories build cooling-off periods into property sale contracts.
What is a cooling-off period?
A cooling-off period is a set window of time (the length differs between states and territories) that allows a buyer to withdraw from a contract of sale, usually with a penalty but without further repercussions.
It's important to remember the cooling-off period only applies to buyers and not sellers and to properties purchased by private sale, not those sold at auction.
See also: Selling your property via private sale vs selling at auction
How long is the cooling-off period in real estate?
The time and rules surrounding cooling-off periods differ between states and territories.
Some states - Western Australia and Tasmania - don't have automatic cooling-off periods built into contracts of sale, so it's important to understand what you're up for when you sign your name in those jurisdictions.
Here's a rundown of the latest regulations, as at August 2024:
| State/territory | Cooling-off period | Penalty for buyers backing out during cooling-off period |
|---|---|---|
| New South Wales | Five business days | 0.25% of sale price |
| Victoria | Three clear business days from the date the buyer signs the contract | 0.25% of sale price |
| Queensland | Five business days from the buyer receiving a contract signed by both parties | 0.25% of sale price |
| Western Australia | No cooling-off period | - |
| South Australia | Two clear business days after either the contract date or vendor statement is received (whichever is later) | $100 penalty, taken from the deposit |
| Tasmania | No cooling-off period | - |
| Australian Capital Territory | Five clear business days | 0.25% of sale price |
| Northern Territory | Four business days | No penalty |
Each state and territory has its own rules as to when their standard cooling-off periods legally start and end, how sellers are to be informed of the contract's termination, and how penalties (if applicable) are applied.
Generally, the buyer needs to inform the seller (or their agent) of their intention to withdraw from the contract in writing before the cooling-off period expires. A solicitor or conveyancer can help with the wording of the document.
The links provided within the table above give further detail on the procedures and requirements of each jurisdiction.
In states with no mandated cooling-off period, a buyer may choose to add an extra clause to the contract of sale allowing for one, but the seller has to agree to this. It's advisable to ask a solicitor if you wish to go down this path so the clause can be effective if needed.
Why can buyers pull out during the cooling-off period?
While buyers don't need to provide an explanation as to why they're terminating a contract during the cooling-off period, there are several common reasons why they might withdraw. These include:
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There are sudden changes in a buyer's circumstances, such as loss of employment, illness, or accident
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New information may reveal a planned major highway or housing development in the area that could feasibly decrease the property's future value
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The buyer changes their mind, gets cold feet, or finds a better property
A buyer will often add additional clauses to a contract that also allows them to pull out without penalty in specific circumstances. Such clauses typically include:
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Subject to building and pest inspection: Allows buyers to pull out if a building and pest inspection reveals issues with the property
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Subject to finance: Allows a buyer to cancel the contract if their lender doesn't approve their home loan, or doesn't allow them to borrow enough to cover the sale price
Can you waive the cooling-off period?
In some states, buyers can choose to waive or shorten the cooling-off period if they're particularly keen on a property and want to give themselves every chance that their offer will be attractive to the seller.
In jurisdictions that allow it, this needs to be done in writing and the buyer may also be required to consult a solicitor or conveyancer so it's clear they understand the consequences of what they're doing.
See also: Do you need a conveyancer when buying a house?
It's also important to note that only the buyer can choose to alter a mandated cooling-off period; the seller cannot.
Can you extend the cooling-off period?
It's also possible to extend a cooling-off period, but a buyer needs the written agreement of the seller to do so. Again, it's best to consult a solicitor or conveyancer if you're considering doing this.
What if you want to cancel a contract after the cooling-off period?
It's possible to withdraw from a contract of sale after the cooling-off period if a condition of sale isn't met.
Often there will be one or more conditions - such as a subject to finance clause - that allows a buyer to cancel the contract if that condition isn't satisfied. A solicitor can come in handy in ensuring all such clauses are properly set up as a safety net.
However, if a buyer wants to cancel a contract after the cooling-off period when all other conditions have been met, they could be in for serious consequences and considerable expense.
The contract will outline what these consequences are. It could entail paying default penalties and compensating the seller for any losses as a result of the buyer pulling out of the sale.
It's strongly advised to seek legal advice before cancelling a contract.
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