The cooling-off period is a period of time in which a buyer may terminate their contract for the sale of real estate before buying a property. Since legislation can vary between States and Territories, here we will be discussing the cooling-off period NSW.
Depending upon how the sales agreement is written, the cooling-off period may be the only time in which the buyer can terminate the agreement. If the deadline is missed and there are no other provisions making the contract conditional, the buyer will need to go through with the contract. Both buyers and sellers of real estate need to understand what the cooling-off period means for them and what their rights are at this point in a real estate transaction. That’s why it’s a good idea to seek expert advice from property conveyancing solicitors.
What is the real estate cooling off period NSW?
The cooling-off period is a five business day period that begins on the date that the buyer, contracts are exchanged. The cooling-off period ends at 5:00 PM on the fifth business date of the contract. The seller is not permitted to sell the property to any other buyer during the cooling-off period.
During this five day cooling-off period, the buyer has the opportunity to determine whether to continue with the purchase of the property or to withdraw from the contract. The cooling-off period allows time for:
Pre-purchase pest and building inspections/reports
Obtaining unconditional approval of a home loan to purchase the property
Other due diligence a buyer must undertake to determine if the property is a good investment, i.e: Rent Appraisal
The buyer must provide written notice to the seller’s solicitor if the buyer wishes to terminate the contract during the cooling-off period. The buyer must pay .25 per cent of the purchase price to terminate the contract during the cooling-off period. The money may be deducted from any deposit the buyer placed.
If the buyer does not terminate the contract by the close of the cooling-off period NSW, the buyer typically must complete the contract and go through with the purchase. The contract becomes unconditional at the close of the cooling-off period unless separate conditional clauses have been included. For example, the buyer could include a separate condition clause allowing him to terminate the contract even after the close of the cooling-off period if he does not secure finance clause. Any conditional clauses included in the contract must be negotiated between buyer and seller and both parties must agree.
When Does the Cooling Off Period Apply?
The cooling-off period applies to most residential real estate contracts, with “residential property” in NSW defined to include:
Land that has no more than two places of residence on it.
Vacant land on which the construction of a single place of residence is permitted.
A strata lot or lots, each of which have only one place of residence that is constructed or that is under construction.
The cooling-off period NSW does NOT apply to:
vacant or developed land used exclusively for non-residential purposes;
selling property at auction;
properties that exceed 2.5 hectares in area;
properties, where a contract is exchanged on the same day as the property, is offered for sale in a public auction but is passed in.
Buyers may also waive a cooling-off period. Some sellers require the waiver of this cooling-off period before exchanging contracts.
Discuss your requirements with your conveynacer, they will assist and guide you throughout the process.