When you purchase a residential property, whether as an investment or your own home, there are certain standard conditions included in the Contract of Sale.
The ‘cooling off period’ is one such clause, which essentially gives you the ability to rescind on the contract without forfeiting your deposit, so long as you provide written notice that you’re invoking the cooling off period before 5pm on the date it ends.
Purchasers are protected under this clause should you change your mind and want to back out of the transaction.
But be warned, you may still have to forfeit 0.25% of the purchase price, which is generally deducted from your deposit, should you choose to cancel the contract.
How long do I have?
The length of cooling off periods varies from state to state, and is usually between 3 to 5 business days.
However this can either be reduced or extended when contracts are drawn up, and any changes made should always be put in writing.
Be aware that it can be complicated to extend a cooling off period though and your solicitor must complete a form to alter this clause if you happen to be buying real estate in Queensland, for instance.
Is there always a cooling off period?
The short answer is no.
If you buy a property at auction for example, there is no cooling off period.
In some states, properties transacted via private treaty just before or after a scheduled auction will also not be subject to a cooling off clause in the contract.
For example if you negotiate a pre or post-auction purchase in Victoria within 3 days on either side of the auction date you will not be entitled to a cooling off period.
Larger tracts of land (2.5 hectares plus) that are not zoned residential, such as vast agricultural acreage, do not come with a cooling off period either.
Can I negotiate a better deal by waiving the cooling off period?
Purchasers traditionally have a few weapons in their arsenal when it comes to negotiating contract terms that may entice the seller into accepting a lower price for their property.
Although you can ask your solicitor to write up a certificate to waive the cooling off period as a negotiation tactic, using this approach may not really advisable.
Once you relinquish your right to rescind the contract you are locked in to the transaction, full stop.
This can be dangerous, particularly if you start to feel that you may have been pressured into signing a Contract of Sale on say, an off the plan apartment investment, by a fast talking salesperson.
This scenario is more common than you think and while you might believe it would never happen to you, we have seen slick talking product spruikers drag many supposedly savvy property players into deals they should never have made.
In an ideal world, as an educated homebuyer and property investor, you won’t need to enforce a contractual cooling off period on the dwelling you buy, because either you or your buyers agent will have undertaken extensive due diligence to ensure the commitment you are making suits your personal circumstances and goals.
However the cooling off period does provide you with that last little bit of wiggle room though, so think carefully about how and when you might use it.