In Victoria a ‘cooling off’ period applies to the purchase of residential property by private treaty.
This means that if you purchase a property you can effectively walk away from the sale for whatever reason even after you’ve signed an executed contract and paid a deposit, within three ‘clear business days’.
It sounds fairly straight forward but there are quite a few grey areas, which I still can’t get a straight answer for.
For example, there is no consensus as to whether a business day ends at 5pm or midnight. Can you cool off at 11:59pm on the third business day?
What is commonly agreed is that cooling off only applies for private treaty, which basically means any sale except for a publicly advertised auction.
And by ‘publicly advertised’, it needs to have been advertised (online) with a date and time for three business days.
For an auction, the cooling off period does not apply if the offer is signed up within three clear business days of the auction, as this is still considered auction conditions.
So if you sign up an offer on the Wednesday before a Saturday auction, or up until the Wednesday after the auction if it passes in, there is no cooling off.
There’s no clear explanation as to why you don’t get a cooling off period at auction. But one can assume that it would be very problematic if people could just rock up to a public auction, bid like crazy and then walk away afterwards.
Expressions of Interest, boardrooms auctions (unless within three days of an advertised auction), off market sales, or any other private treaty are subject to cooling off.
Cooling off only applies to the purchaser. The vendor cannot cool off.
Also, corporate bodies or estate agents don’t get a cooling off period. I guess we should “know better”?
The cooling off period starts from when the contract is first signed by the purchaser. So if you email a written offer on Wednesday, but don’t sign it up on a contract until Friday, cooling off doesn’t start until Friday.
Once you first sign the contract, even if the terms of the offer change (e.g. price, settlement, deposit, conditions), the cooling off period does not start again.
If you’ve made a similar offer on similar terms for the same property in the past, you don’t get a second cooling off period. So if you offered on a house in April and it didn’t sell and then offered again in May and the offers was accepted, you technically wouldn’t get a cooling off period the second time round. Although I’m not sure if this is the generally accepted practice.
A purchaser is able to waive their cooling off rights if they would like their offer to be unconditional, and therefore more likely to be accepted. We rarely see this but you might want to keep that up your sleeve if you’re making an offer and want an edge over other offers.
There is a penalty for cooling off, either $100 or 0.2% of the purchase price, whichever is greater (always the 0.2% in our market).
So if you purchase a house for $1,500,000 and then cool off you could be up for $3,000. Your deposit is fully refundable less this 0.2%.
If a deposit hasn’t been paid, it can be difficult for the vendor to chase up this penalty.
We rarely see buyers cooling off in our market. It happens once or twice a year. Nevertheless, it’s always an anxious wait for our vendors (and sometimes us) until the sale is unconditional.
If you buy a property from us, please don’t cool off! It’s not cool.
Next week we have a couple of very exciting off market opportunities – both freestanding Victorian single fronts – one in Prahran and one in Malvern… More details next week.
Thanks for reading,
Feature Image – 6 Medley Street, South Yarra