Ins and outs of cooling off periods
You’ve found the perfect home, you and the seller have agreed on a perfect price, and “all’s right with the world”. Or is it? Excitement and expectations run high when it comes to property purchases and sales but concerns can move in afterwards. This is why cooling-off periods are crucial.
Cold feet or concerns = Cool off relief
As real estate agents, we’re all too aware post-contract doubts and problems occur. Your finances may fall through; unexpected emergencies might crop up, such as losing your job or a death in the family; your conveyancer could detect an issue, or you may simply get cold feet. All these reasons and more are why cooling-off periods exist. These intervals give buyers the chance to cancel a sales contract. While the details differ from state to state – with some not offering cooling-off periods at all – cooling-off periods are usually in place for five business days, starting from the day you receive the signed contract and a deposit is paid.
Pros and cons
Cooling off periods are a great way out for property purchasers but there are pros and cons to them. If you decide not to buy the home, you will need to pay the seller a termination fee or penalty. Depending on which state you’re in, this can be equivalent to 0.25% of the home’s total sale price. So, it’s important for you to consider whether paying this fee is worth it. If you do decide to terminate the sale, the seller will need a written notice of this decision, usually organised by your conveyancers. If you’re the seller, you will need to refund the deposit within 14 days. A buyer backing out of a sale will also be a highly stressful time for you, with potential buyers often gone to ground after you thought your house was sold. It’s always best not to breathe a sigh of relief – and pop open the champagne – until after the cooling-off period, at least.
Be aware that cooling-off periods only apply to private treaties and not auction sales. For personally negotiated contracts after an auction, these details may be included. Buyers can also request to waive their rights to a cooling-off period or cancel a contract after this time ends. But the latter decision is rarely a good idea as it can be extremely costly, so seek plenty of legal advice from your conveyancer before doing so. The bottom line in all of this is to always be 110% confident and convinced about your purchase before you sign off on it. Don’t let yourself be shaken by 3am doubts. Ensure you organise pre-purchase building and pest inspections and lender approval; ask your conveyancer plenty of questions; surround yourself with sensible friends and family who’ve bought properties themselves.