Residential Property, Know your cooling off rights.
Contracts of sale are exchanged when the buyer’s offer has been accepted by the seller and two identical contracts have been signed by both. However, a property is not considered sold until the buyer has paid the 10% deposit of the purchase price to the seller since the buyer is able to rescind the contract during the cooling-off period.
What is cooling-off period?
Pursuant to section 66S of the Conveyancing Act 1919 (NSW), every buyer of a residential property through private treaty sales is entitled to a 5 business day cooling-off period after contracts are exchanged. The cooling-off period is beneficial to the buyer for the following reasons:
- The buyer is only required to pay an amount equal to 0.25% of the purchase price to secure the property for 5 business days;
- The buyer has 5 business days to do due diligence such as reviewing pest, building or strata inspection reports to uncover any potential problems before paying the 10% deposit of the purchase price to the seller;
- The buyer has 5 business days to obtain unconditional loan approval and will be able to get out of the contract, forfeiting only 0.25% of the purchase price to the seller, if the bank does not issue the loan approval during that time.
Why does the seller insist on a section 66W certificate?
A seller can demand a buyer waive their cooling-off rights by insisting the buyer’s solicitors to issue a section 66W certificate. This means the buyer is forced to pay the 10% deposit of the purchase price to the seller while has not yet received critical information about the property nor has received an unconditional loan approval from their bank.
It is not recommended for a buyer to waive their cooling-off rights as that would provide the seller with the opportunity to gain an undeserved windfall if the buyer decides to rescind the contract.
Should you be looking to buy a residential property, our Property Team can ensure you fully understand your contractual rights and obligations prior to the expiration of the cooling-off period or cooling-off period being waived. We may also negotiate on your behalf for longer cooling-off period if extra time is required to finalise your loan approval or to complete all due diligence checks.
For more information please contact us or call 02 8764 1776
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