What are your rights when terminating property purchase contract
Buying a home is a big deal, not only does it takes time to do property research and it’s also requires a considerable amount of financial investment. With so much at stake you cannot afford to commit to a less than ideal purchase.
Whether the lender who gave you the pre-approval decides that your proposed property doesn’t meet policy, or the building and pest inspector provides a damning property report – whatever the cause, you need to know your ‘get out’ options from any proposed property purchase.
The contract for sale outlines both the seller’s and buyer’s legal obligations with regard to the sale. The terms of the agreement are negotiated by both parties and should be closely reviewed by your conveyancer.
If you have decided to cancel your sale agreement, this is what you need to know.
Compare how your home loan compares
Cooling-off periods
Most residential contracts for sale include a cooling-off period. Homes bought at auction do not have a cooling-off period so you must be confident about your purchase decision and financing.
It is possible to waive, reduce or extend cooling-off periods on standard contracts for sale, depending on pre-sale negotiations.
Each Australian state and territory legislate a different cooling-off period and financial penalty associated with cancelling a residential sale. Contract cancellations need to be made in writing and within the specified period of time, either in person, by email or by fax.
· Queensland: You have five business days from the day both seller and buyer sign the contract. If this falls on a weekend or public holiday, the five-day period starts the next day. The cooling-off period ends at 5 pm on the final business day. The seller may deduct a financial penalty of 0.25 per cent of the purchase price from your deposit if you opt out.
· New South Wales: You have five business days starting from the exchange of contract through to 5 pm on the fifth day. You will have to forfeit 0.25 per cent of the purchase price to the seller to cancel the contract.
· Victoria: You have three business days starting from when the buyer signs the sale contract. You will be required to pay 0.2 per cent of the purchase price to the seller to back out.
· South Australia: You have two business days to change your mind and the notice must be given by the close of the second business day. Any purchase deposit paid over the value of $100 must be refunded in full. You will have to forfeit a holding deposit if you left one.
· Australian Capital Territory: The rules here are the same as for New South Wales.
· Northern Territory: You have four business days from the exchange of contracts when both buyer and seller have signed. You can change your mind without penalty, and both purchase and holding deposits will be refunded.
· Tasmania: There is no cooling off-period on real estate contracts for sale.
· Western Australia: There is no mandatory cooling-off periods unless the buyer and seller have one inserted into the contract.
Additional conditions can be added to a contract for sale to allow buyers to terminate contract before it becomes unconditional.
Conditions such as, ‘subject to finance of buyers choice’. This means the settlement of the sale may be dependent upon your ability to obtain finance form a range of preferred lenders.
Other conditions can include, the sale of your existing home or the outcome of building inspections conducted on the property for sale.
Unconditional contracts or post the cooling-off period
If you buy at an auction, waive your right to a cooling-off period or have changed your mind outside the specified cooling-off period, cancelling the sale will become an expensive exercise.
Your contract for sale will outline the consequences of withdrawing from the binding agreement. They are likely to include default penalties and compensation for any losses experienced by the seller, along with your own legal or conveyancing fees, and building valuation and inspection costs.
Talk to your legal advisor about the ramifications of breaking a legally binding contract. If you have any doubts about buying the property, do not sign an unconditional contract or waive your right to a cooling-off period.
If buying at an auction, loansHub offers free pre-auction valuation when you apply for conditional pre-approval through loansHub to help avoid financing issues once you win the auction.
Tell us: Enjoyed this article? Don’t forget to like and share.
And while you’re here, take our mortgage shredder challenge and discover how much you can save on your home and investment loans by using loansHub technology as your personal mortgage manager. To discover why loansHub and what we do, click here.
This article via does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.