In NSW, you are given a five business day cooling off period when you purchase residential property. The cooling off period once you exchange contracts and ends at 5pm on the fifth business day after. You entitled to exit the contract during this time, if you give written notice.

A cooling-off period allows you to:

have a deep think about what you are about to buy;
finalise any loan arrangements you plan to undertake; and
conduct pest and building inspections and other relevant searches.

Cooling off periods don’t apply if you buy at auction or exchange contracts on the same day as the auction after it’s passed in.

The cooling off period can be waived by giving the vendor a 66W Certificate. You can reduce or extend the cooling-off period by written agreement with the vendor.

Does a cooling off period allow me to back out?

You, the purchaser can decide to back out of the contract during a cooling off period (without providing a 66W certificate) you still have to pay a penalty, 0.25% of the purchase price. For example, 0.25% on a $750,000 property is $1,875.00.

Purchasing at auction or signing a s66W certificate will mean there is NO COOLING OFF PERIOD. Therefore, you will be penalised as per the original contract. The penalty is normally 10% of the purchase price, PLUS the difference between your offer and the subsequent sale of the property.

For example, if you were buying a property for $750,000, but backed out and the property sold for $650,000 to someone else, you may also be sued for the difference in the reduced price. Yes, $100,000!

The difference in the penalty can be significant. You need to be confident when using a s66W certificate and you should undertake due diligence prior to signing. Also, ensure you have unconditional finance approval in writing before providing a s66W certificate.

Once of the biggest drawcards (and pitfalls) of s66W certificates is implied pressure you may feel to ‘lock in’ yourselves as the buyer before another offer supersedes yours.

Your representative (us) will review the contract and discuss this matter in detail, prior to making any commitment to waive a cooling off period with a s66W certificate.

If you have any questions about your situation, contact me via leah@stevensconveyancing.com.au or call 0414 894 031 to discuss.

Please note that the information contained in this article is of a general nature only and does not constitute legal advice. Stevens Conveyancing does not take responsibility for any errors or omissions obtained from the use of this information.