| How cooling off periods work
A cooling-off period starts the day you sign a contract and usually lasts for five business days. However, regulations differ among states, so it’s essential to do your research.
What is a Cooling-Off Period?
The cooling-off period allows the buyer to reconsider their decision to purchase a property and cancel the contract if they change their mind. Cancellation during this period incurs a penalty which amounts to approximately 0.25% of the total sales price. This penalty compensates the seller for any financial losses incurred due to the cancellation. Cooling-off periods only apply to private settlements or private treaty purchases and not auctions.
Steps Involved
Before signing the agreement, the agent responsible for the sale must provide the buyer with an unsigned copy of the contract at least one business day in advance and the relevant state consumer guide. The buyer must also sign a waiver form approved by the Office of Fair Trading before signing the agreement.
For house purchases, the cooling-off period usually lasts for five business days, beginning the day the buyer receives a copy of the signed contract and ending at 5 PM five business days later, excluding weekends and public holidays. To prove when the cooling-off period begins, buyers should request a time/dated receipt of delivery of the contract. During the cooling-off period, buyers should ask their conveyancer to check and report to ensure there are no issues.
Buyers have the option to terminate or cancel the agreement only during the cooling-off period. If the buyer decides to back out of the contract after the end of the cooling-off period, it can be costly and problematic, requiring legal advice.
Rescinding the Agreement
To rescind the agreement, the buyer must write a letter/notice of termination to the real estate agent within the cooling-off period. It’s essential to require a receipt of delivery from the agent to avoid discrepancies regarding timing. Cancelling the contract after the cooling-off period results in being bound by the agreement.
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