Whether you are selling a home or in the market to buy a new place, it's important to understand the process.
There are some elements to the housing market that first-time buyers or novice sellers might not fully understand. You may have heard of the terms, but are unsure of how they fit into the process. If this rings true, you are not alone. For example, the concept of a cooling off period may be somewhat foreign to you, from the reason to the legality of it all.
Let's get into the details, and by the end, you should feel like an expert.
To be concise, the cooling off period is a predetermined amount of time that a buyer can withdraw from a residential property contract of sale. It is a great purchaser tool that has been helpful in some situations, especially in 2022. This year has brought some uncertainty for some, but the cooling off period can help alleviate some stress. During this time period, there will not be any legal repercussions for backing out even if the contract has been signed. In most cases, a cooling off period is only applicable to the purchaser and not the seller.
A conveyancer is a key player in the process of transferring ownership through a legal title, and therefore has the most control over the cooling off period. This person is the one who will review the option contract of sale and settle the property purchase. In any case, if you have questions about the cooling off period, the conveyancer is the person you should go to.
The length of the cooling off period changes depending on the state that the property sale is taking place. It could be anywhere from two to five days, but there is the possibility that a cooling off period does not occur at all.
Here is the current average amount of time, according to Fair Trading, that the cooling period can last depending on your state:
So now that you understand the basics of what a cooling-off period is and how long it can last, it's time to dive into how the process works. There are several things that should be arranged to work in the buyer's favour. Here are some of the best examples:
If anything goes wrong with the inspection, then you still have time to withdraw from the contract or sale without penalty. In most cases, the cooling off period is a consumer right that occurs after the contract and settlement has been signed for the purchase price, but before the sale agreement becomes final. The licensed conveyancer can communicate the length and boundaries in your particular sale contract.
You might be wondering why you would want to cancel your sale in the first place. After all, you've taken all the steps to get to this place with the vendor. But the truth is, that there are several reasons why you may want to back out of homeownership in certain circumstances, such as waiting for a property valuation.
An inspection is a process that every property buyer should go through when considering a home. A company goes into the house and conducts an inspection to look for potential problems with the structure. This could include pest infestations, faulty pipes, bad roofs or leaking gas. Then, they report their findings and let you know what you are getting yourself into. After looking at the results, you may see something that is alarming. In which case, you could use the cooling off period to back out of the contract on that basis.
There are also personal reasons that you may want to stop the sale of the house. Your circumstances could have changed since the beginning of the process, including financial situations. The cooling off period can act like a safety net if something in your life doesn't go as planned.
Perhaps you were picking between two amazing properties and had to settle for an offer on the second property on your list. In the event that the home that you first preferred becomes available, you could use the cooling off period to cancel the sale and go with the better choice.
You may be waiting for your home loan to be fully finalised by the lender. If this is true, your house contract might have a section that uses the term "subject to loan approval." This means that the sale depends on the lender's approval.
All in all, there are many different reasons that someone could benefit from a cooling off period. Every person may have a different reason, but this grace period is advantageous nonetheless.
There might still be some lingering questions floating through your mind at this point. Like are there any penalties for withdrawing during a cooling off period? The answer depends on the state where you are doing business. In some circumstances, the property seller may have the right to keep a small percentage of the deposit. This is not universally true, however.
Say that you've found your dream home, and are 100% sure that you will not be backing out of the sale. The cooling off period can seem like forever to wait for the sale to finalise. In this case, you may be able to waive off the cooling period. This is what is called an unconditional contract of sale.
On the other hand, you may feel like you need some more time to think about this big financial investment. If the cooling off period is not long enough, you must converse with the seller and if you are both on the same page, the allocated period of time could be extended.
Keep in mind that you only have the allotted amount of time to decide whether to go through with the purchase or not. Sure, you could back out after the cooling off period, but the penalties would be extremely expensive. So use this time to your advantage while you can.
If you are still confused about the cooling off period as it relates to your special situation, communication is your best bet. Talk to your real estate agent and your conveyancer about your questions and concerns. These professionals will have the answers that you are looking for and can help guide you through the process.