What is a cooling-off period?
Once you have exchanged contracts and paid a deposit on a property, you have a legal right over that property, called a financial interest. At this point, there is a brief cooling-off period (in most states and territories) during which you can get out of the contract if you provide written notice, but you would not get your whole deposit back in some states and territories. There is no cooling-off period if you buy at auction.
The cooling-off period is vital for those borrowers who do not already have home loan pre-approval (known as approval in principle). Borrowers should not sign an unconditional contract (e.g. at auction) or waive their right to a cooling-off period if they have any doubts about getting finance for a property purchase.
How long is the cooling-off period for real estate in Australia?
The usual real estate cooling-off period is a different length in each state and territory:
- NSW: 5 business days (Fair Trading NSW). Buyer forfeits 0.25% of the purchase price to the seller.
- VIC: 3 business days (Consumer Affairs Victoria). Buyer must pay 0.2% of the purchase price to the seller.
- QLD: 5 business days (Queensland Government). Seller may keep 0.25% of the purchase price from the deposit paid by the buyer.
- SA: 2 business days (Department of Premier and Cabinet SA). Any deposit paid that was over $100 will be refunded in full, but the buyer forfeits any holding deposit.
- WA: No cooling-off period applies unless contract specifies a cooling-off period (Department of Commerce WA).
- ACT: 5 business days (Conveyancing Canberra). Buyer forfeits 0.25% of the purchase price to the seller.
- NT: 4 business days (Northern Territory Government). Both purchase deposit and holding deposit will be refunded to the buyer.
- TAS: No cooling-off period applies to any sale of property in Tasmania (Consumer Affairs and Fair Trading Tasmania).
After the cooling-off period, the contract for sale becomes unconditional and you will no longer be able to back out of the contract without significant financial penalties. The contract for sale will outline what the buyer is required to pay the seller as compensation for pulling out of an unconditional contract. These costs may include paying your own and the seller’s legal or conveyancing fees, and your own and the seller’s building valuation and inspection fees.
Any buyer considering backing out of a property purchase should obtain legal advice before breaking a legally binding contract.