When does a cooling-off period start?
The cooling-off period begins once the buyer exchanges signed contracts with the seller.
Typically, the cooling-off period in NSW is five business days for residential property purchases. During this period, the buyer can withdraw from the contract for any reason. However, the buyer will lose 0.25% of the purchase price as a penalty for withdrawing during the cooling-off period.
Before the cooling-off period ends, the full 10% deposit (unless another amount is negotiated) must be transferred to the real estate agent.
Once the cooling-off period has ended without objection from either party, the contract is declared “unconditional” (meaning locked-in), and the entire settlement process begins.
It’s important to note that the cooling-off period does not apply to properties purchased:
- At auction – winning an auction is considered an unconditional exchange of contracts. So, buyers must complete all negotiations relating to the contract, have their finance approved if borrowing money, and conduct their building, council and insurance checks before auction day
- When the land size exceeds 2.5 hectares (or approximately 6.1acres)
Is the cooling-off period negotiable?
Yes, the cooling-off period is negotiable by both the buyer and the vendor. Like all negotiations, several factors will affect the outcome of whether it is agreed to or not.
Buyers may request a longer cooling-off period for many reasons, such as:
- Organising finance approval
- Requiring longer inspection times
- Requiring a valuation of the property
- Arrangements for a property they’re selling
The reason why does not have to be provided to the vendor but can be simply out of courtesy.
Buyers may be asked to waive their right to a cooling-off period in exchange for other concessions or benefits.
Waiving the cooling-off period can be a strong negotiation tool for buyers as it shows they are really serious. This can be used as a fantastic negotiation tactic as long as the buyer has:
- All finances are in order, including formal loan approval
- They are satisfied with any reports completed, such as the pest and building report
- And have no reason to hesitate to be locked in to buying the property
What to do during the cooling-off period
Review the Contract of Sale and seek legal advice
During the cooling-off period consult with your conveyancer or solicitor who will review the contract, guide your rights and obligations, and advise you on any potential risks or issues. This will ensure that you understand all aspects of the contract, including the sale price, deposit amount, settlement terms and dates, stamp duty amounts, and any special conditions.
Arrange property inspections
Use the cooling-off period to organise any necessary property inspections, such as building inspections, pest inspections, or strata inspections. These inspections can help identify any structural issues, defects, or other concerns with the property.
Review your finance
If you are borrowing money for the property purchase, the cooling-off period allows your lender or broker time to formally approve your mortgage application and ensure you have unconditional loan approval.
Consider insurance needs
During the cooling-off period, explore insurance options for the property, including building and contents insurance. Insurance costs can vary so much for different addresses. As a buyer, you want to make sure you can afford the insurance before you commit to buying a property. It’s essential to ensure that the property is adequately insured from the day of settlement.
What is a 66w?
When purchasing or selling a property, you might encounter the phrase “issue a 66w.” This legal term denotes the buyer’s action of waiving their cooling-off rights. The waiver, signed by the purchaser’s conveyancer, not the purchaser themselves, follows a thorough explanation of the associated risks. Before a 66w can be issued:
- The full 10% deposit must be paid and be in the real estate agent’s trust account
- The conveyancer must have reviewed the contract for the buyer
- If securing a loan for the property, it is recommended the buyer has full unconditional loan approval
- The buyer is satisfied with the building and pest inspection if they wish to have one done
Use a 66w as a negotiation tool
A 66w serves as a potent negotiation instrument for buyers, sellers, and real estate agents alike. From a negotiation standpoint, its inclusion holds significant leverage and appeal for vendors when receiving offers. Occasionally, buyers might opt to forgo their cooling-off period in return for alternative concessions or advantages. Moreover, sellers can capitalise on this dynamic. In instances where buyers request concessions and benefits, sellers may stipulate the issuance of a 66w as part of agreed terms – a quid pro quo scenario.
Is there a cooling-off period when selling a house?
In NSW, sellers do not have a cooling-off period when selling a residential property. Once the seller and buyer have exchanged signed contracts, the sale becomes legally binding, and the seller is typically obligated to proceed with the transaction according to the terms of the contract.
The cooling-off period primarily benefits buyers, allowing them to reconsider the purchase and withdraw from the contract without significant penalties. However, sellers do not have the same option to back out of the contract during this period.
It’s essential for sellers to carefully consider all aspects of the sale before signing the contract, including the sale price, settlement terms, and any special conditions. Once the contract is signed and exchanged, the seller is generally bound by its terms and obligated to complete the sale, subject to any provisions outlined in the contract of sale. However, there may be certain circumstances where a seller can terminate a contract, such as if the buyer fails to fulfill their obligations or breaches the terms of the contract.
Learn more about what happens after a contract is exchanged and how to prepare for settlement.
