How Cooling Off Periods Work
How Cooling Off Periods Work
A cooling off period begins the day you sign the contract and typically lasts for five business days. Here’s what you need to know:
What is a Cooling Off Period?
A cooling off period gives buyers time to ensure they want to proceed with the purchase. If you change your mind about buying a property during this period, you can cancel the contract. However, pulling out will cost you—about 0.25% of the total sales price.
For example, if the property sells for $1 million, the penalty will be around $2,500. This penalty is paid to the seller to compensate for their losses.
Cooling off periods apply only to private settlements (or private treaties) and not to properties bought at auction.
What Steps are Involved?
- Receive a Copy of the Contract: You must receive a copy of the unsigned contract at least one business day before signing from the agent responsible for the sale.
- Consumer Guide: The agent must provide you with the relevant state consumer guide regarding agreements.
- Sign the Waiver Form: You must sign the waiver form approved by the Office of Fair Trading before signing the agreement.
General Rule for House Purchases
For house purchases, you usually get a five business day cooling off period. This starts the day you receive a copy of the signed contract and ends at 5 PM five business days later. This period does not include weekends or public holidays.
To prove when the cooling off period starts, ask for a time-dated receipt of delivery of the contract. During the cooling off period, have your conveyancer check and prepare reports to ensure there are no problems.
Option to Cancel
You can terminate the agreement only during the cooling off period. If you decide to back out after this period, it can be very expensive and complicated. You’ll need good legal advice for this.
Rescinding the Agreement
If you decide to rescind the agreement, you must do so within the cooling off period. Write a letter or notice of termination to the real estate agent to cancel the contract. Ensure this letter is delivered before the end of the cooling off period, and ask for a receipt of delivery to avoid any timing discrepancies.
Note
Regulations vary by state, so make sure to do state-specific research.
Welcome Home
At JKL, we’re here to guide you through every step of the home-buying process. Our experienced team will help you understand and navigate cooling off periods, ensuring you make informed and confident decisions.
Experience our JKL real estate family. We’ll put the welcome mat out for you!