There are opportunities and dangers when surrendering your cooling off period.
In the heat of the moment, the exhilaration of finding and snaring a jewel in the real estate market can be a buyer’s natural adrenalin. But then you sleep on it. And you start to think… Maybe the place will need a bit more work than expected. And how many extra dollars will that cost?
The timber floors seemed a bit creaky in places… maybe termites have also made it their home. It might be worth arranging a pest inspection to make sure the place is structurally sound.
Perhaps that dodgy-looking light switch is evidence of a shoddy DIY job. That could be a safety hazard if it’s not checked out by a qualified electrician…
You begin to worry that your astute buy may be not so great after all.
But with a cooling off period – a legal right most home buyers have, except in relation to auction buys – you are entitled to five business days within which you can, quite simply, change your mind.
The cooling off period after exchanging contracts is an ideal time to get your house, building, pest and other inspections done by suitably qualified professionals. It gives you sufficient time to make sure that you’re happy with the quality of the property before buying it.
Consequently, this facilitates the buying process, as it lets you sign and exchange contracts faster.
Further, exchanging early will stop the seller from accepting another buyer’s offer – a practice commonly known as ‘gazumping’.
And if you’re not happy with your new place once contracts are exchanged, you can cancel the signed contract by giving the seller written notice before the cooling off deadline.
While pulling out of a contract during the cooling off period is not completely without penalty, you’ll be in a far better position than if you waited until after the expiry of the cooling off period.
If you exercise your ‘cooling off rights’, you’ll lose a small portion of your deposit – typically around 0.25 per cent of the purchase price, or $250 for every $100,000 – but at least you won’t lose all of it or be up for further costs. You’ll be able to walk away.
Despite the benefits of having a cooling off period, it has become a popular practice for sellers to ask buyers to ‘waive’ it.
Sellers often want to waive the cooling off period in a contract because they don’t want to be messed around – they simply want to ‘lock in’ a buyer.
And this is generally ok so long as you know and understand what will happen if you do agree to waive the cooling off period.
By waiving the cooling off period, you give up your right to pull out of the contract within the 5 business day period without incurring a significant penalty.
But if you’re happy with the place, have done your inspections, arranged finance and are altogether ready to go, then it’s probably not that big a deal. It really just depends on your situation.
Source: Smart Property Investment, 1 May 2011, http://www.spionline.com.au/2011/05/keeping-your-cool/