Buying a property is one of the most important and exciting decisions you will make. Understanding the cooling off period will give you more confidence when buying your next property.
What is the cooling off period?
Essentially, the cooling off period is thinking time get you get once you sign a contract, It gives you time change your mind.
In practice what happens on a ‘Standard’ Contract of Sale in NSW is once you offer has been accepted you sign the contract (once your Conveyancer has reviewed it) and you pay a partial deposit of 0.25% ($250 for every $100,000) and you get a 5 business day cooling off period.
The point of the cooling off period is to give us time to finalise your loan approval and complete a Pest & Building Inspection or a Strata Report (if you are buying a unit) completed to make sure there are no surprises.
At the end of cooling off the sale contract becomes ‘Formal’ and you pay the remainder of the deposit (normally 10% but can be negotiated to 5% if you need) and everything flows along to settlement.
Settlement by the way is the day you take ownership and get the keys, normally 42 days after you sign the contract.
Are there times Cooling off does not apply??
yes, there are 3 times when a cooling of does not apply when buying Real Estate.
- The person selling the property (the vendor) is not entitled to a cooling off period.
- When you are buying a place at Auction.
- When you waive the cooling off period (see below)
Buying at Auction means at the “fall of the hammer” the contract is unconditional. You then pay the 10% deposit (again you can negotiate a 5% deposit) on the spot and you are locked in, the place is yours. You still have to wait 42 days for settlement to occur so you can move in….
The key here is that you need to do your inspections upfront, before the Auction, so you know exactly what you are buying.
There is a challenge here, the bank/lender we are using will not do their valuation report before the Auction, essentially as they want to see the Contract Price you have negotiated before starting. This is not normally an issue anyway but more something you need to be aware of.
Waiving the cooling off period
The cooling off period can be waived, reduced or extended as part of the negotiation process. For example say you are 4 day into the cooling off period and you finance is not ready you can ask for an extension for another couple of days so the bank/lender has time to finalise their valuation.
An example of where you may decide to waive the cooling off – say there are 2 people bidding on the same property and you can go to the Agent with a signed contract and your deposit cheque PLUS a signed 66W (the form to waive the cooling off period). The Agent & Vendor may accept your offer as they have a contract that automatically goes unconditional – makes the standard contract just like an Auction contract.
To waive the cooling off period, you’ll need a ‘section 66W certificate’. This certificate complies with Section 66W of the Conveyancing Act 1919 and is prepared and signed by your Conveyancer or Solicitor. It is required to be handed to the vendor’s Conveyancer, Solicitor or agent, together with your signed contract and deposit so when contracts are exchanged the contract is binding on both vendor and purchaser.
In the Sydney Market at the moment most Vendors & their Agents are making a 66W a standard part of the contract. So essentially if you do not sign it you do not get the property. In a way it takes away your choice – but it just makes the contract the same as an Auction Contract so it is not all that bad as long as you understand what you are doing and have a preapproval sorted first.
Contact me click here today to book your appointment and get your pre approval sorted
When you get a copy of the contract look out for the page called 66W so you know what to expect.
And please before you go to Auction or sign a contract – talk to your conveyancer first, get them to review the contract & get a strata report or a pest & building report done so you do not get caught out.
I hope you find this useful and maybe a little interesting…
David Johnson – The Home Loan Guy