A “cooling off period” is part of the terms of the contract for sale.
It gives a buyer the right to change their mind about entering into a contract to purchase property in some circumstances. Here’s what you need to know.
What does a cooling off period mean?
The cooling off period helps protect the buyer. It gives them a certain period of time in which they can choose to change their mind and back out of the signed agreement without losing their total deposit.
If the buyer does choose not to proceed with the purchase they will pay a much smaller termination fee, which varies from nothing to around 0.25% depending on the state or territory. The remainder of the deposit will be refunded to the buyer.
How long is the cooling off period?
The cooling off period is set by the state or territory and varies from 2-5 business days. Tasmania does not have cooling off periods.
Be aware that public holidays and weekends can affect the cooling off periods.
When does the cooling off period not apply?
The cooling off period does not apply to property purchased at auction. And while each state and territory has their own requirements for a cooling off period, it does not currently apply in Tasmania.
Buyers can also choose to waive their right to a cooling off period.
Can the cooling off period be changed?
Buyers can ask to have their cooling off period extended, but vendors have the right to refuse this. Buyers can also waive their right to a cooling off period altogether and vendors can also request this.
A written notice is usually required to cancel the contract during the cooling off period. After this, the balance of the deposit, minus the termination fee, should be refunded to the buyer.
What else should I know?
It’s worth discussing the cooling off period with your real estate agent, and solicitor or conveyancer.
For vendors, having no cooling off period can provide you with some certainty, however it may deter a motivated buyer.