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What is a cooling off period, and how do they work?
Key highlights
A cooling off period in real estate is a length of time after you sign a contract to purchase property when you can terminate the agreement without breaching the contract and losing your deposit. This gives you a window of opportunity to change your mind about a real estate purchase if your circumstances change, or you decide it’s not right for you.
For example, if you signed a contract to buy a house with a five-day cooling off period, then changed your mind about the purchase, you could exercise the cooling off period to withdraw from the agreement within five days. You’d get your deposit back (minus a small fee), so you could still go out and make an offer on another property if you wished.
The exact rules around how cooling off periods work vary in Australia’s different states and territories, so it’s important to check the facts before you sign on any dotted lines.
When should I use a cooling off period?
Some common reasons why a buyer might make use of a cooling off period when buying a house include:
- If the building and pest inspection, or strata report, reveals issues with the property
- Your mortgage finance is not approved by your lender (even if you had preapproval)
- Your financial position changes (e.g. you lose your job) and you can no longer afford the purchase
- You change your mind about your purchase (maybe a better deal comes along, or you decide to buy in a different area)
What happens if I cancel a contract after the cooling off period expires?
The exact consequences of breaking a contract will vary depending on the state or territory where you’re located, and what terms and conditions you’ve agreed to. You can often expect to lose your deposit on the property, as well as any other fees and charges you’ve paid during the purchase process.
There may be other legal repercussions for breaking a contract, so consider seeking legal advice before you consider doing so.
When does a cooling off period apply?
Not every real estate contract includes a cooling off period. Sales by private treaty often include cooling off periods, while cooling off periods are often waived when buying a property at auction or even prior to auction.
When negotiating to buy a property, some buyers will offer to waive the cooling off period in the contract. This can help show a seller that they’re a serious buyer who fully intends to complete the real estate purchase, as breaking the contract could cost them a lot of money.
If you’re thinking of buying a property without a cooling off period, it’s especially important to check the contract’s details before you sign, as you may not be able to easily back out of the deal if your circumstances change or you discover new information about the property. You could consider organising building inspections and/or strata reports early, so you can find any problems before you buy.
What does a cooling off period cost?
While cancelling a contract during a cooling off period typically lets you get your deposit back, you may still need to pay a fee to the vendor as compensation for their inconvenience. This fee is typically a percentage of the sale price.
Cooling off periods state by state
Australia’s states and territories follow different rules when it comes to cooling off periods in real estate:
State/Territory | Cooling off period | Fee |
5 business days (10 for sales off the plan) | 0.25% of the purchase price | |
5 business days | 0.25% of the purchase price | |
3 business days | $100 or 0.2% of the purchase price, whichever is greater | |
5 business days | 0.25% of the purchase price | |
2 business days | Your holding deposit, up to $100 | |
4 business days | None | |
No mandatory cooling off period, but you can have one added to your contract | - | |
3 business days (optional) | None |
IMPORTANT
Check with your solicitor, conveyancer, or legal advisor for more information around cooling off periods and contract law in your state or territory, as they can advise you how specific details in a real estate contract may affect your unique circumstances.
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Product database updated 24 Dec, 2024
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