How cooling-off periods work

A cooling-off period is a period of time during which a purchaser can change their mind about a purchase. In residential real estate transactions, cooling off periods are often written into the terms of a private treaty contract of sale.

They stipulate a period of time following the exchange of contracts when the buyer can withdraw from the transaction, subject to, in some circumstances, the buyer paying a financial penalty.

Most contracts for sale for residential properties will include a cooling off period. The notable exception is residential property sales conducted via auction, where the buyer will typically waive their right to a cooling-off period as part of the auctioning process.

Depending on the state or territory you live in, the legally mandated cooling-off period for property sales could be anywhere between two and ten business days (i.e. not including weekends or public holidays), or you may not be entitled to one at all when buying property.

If your state or territory mandates a cooling-off period, it will usually begin when the buyer and seller exchange copies of the signed contract of sale.

The cooling-off period gives buyers a chance to ‘cool down’ from the initial excitement and elation of a property purchase, as well as potentially conduct checks and inspections on the property, to make sure everything’s in order.

The cooling-off period gives buyers an opportunity to think about their purchase, hopefully avoiding regretting a property purchase. It can also provide an opportunity to spot problems with the property that may impact the decision to purchase.

Depending on the state or territory you live in, you may be able to waive your cooling-off rights when buying property. If you do, you’ll generally need to give written notice of your decision to the seller’s agent or solicitor. You should seek legal advice before waiving the cooling off period.

After the cooling-off period ends (if one is in your contract), and provided all conditions stipulated within your contract have been met or waived (e.g. finance or building and pest inspections) you will usually be able to proceed to settlement.

The name of the game during your cooling-off period is due diligence. If you can, consider getting a pest inspection and a building inspection done, and any other inspection that could be useful.

If your contract of sale is unconditional, and doesn’t hinge on finance being approved or the results of building and pest inspections, the cooling off period is your opportunity to pull out of the contract if you find any issues with the property.

You may renege on your property purchase because something turned up during the building and pest inspections, or because you’ve simply decided you don’t want to go through with the purchase.

If you decide to use your cooling-off period to withdraw from a property contract of sale, the seller may have the right to a termination fee. Whether you have to pay a termination fee and how much it is will depend on your state or territory.

If you want to withdraw from a property purchase during your cooling-off period, you’ll typically need to contact your solicitor, conveyancer or the real estate agent handling the transaction.

You should seek legal advice before cancelling a property contract of sale.