Your Right to Walk Away: Understanding Cooling Off Periods in NSW

You're Ready to Buy — Now It's Time to Sign the Contract (NSW)

What is a cooling off period? 

In NSW, buyers of residential property are afforded a five business day cooling off period, which commences the day after the contract is exchanged. This period is designed to give buyers time to complete their due diligence before the purchase becomes unconditional.

At the time of exchange, the buyer is required to pay 0.25% of the purchase price to the selling agent as an initial deposit.

Once the cooling off period expires and the buyer proceeds with the purchase, the balance of the deposit - typically either 5% or 10% of the purchase price — becomes payable, with the 0.25% already paid being credited toward that amount.

The cooling off period was introduced as a protective mechanism for purchasers, guarding against high-pressure sales tactics and the risk of contracts becoming unconditional before a buyer has had the opportunity to undertake further due diligence or conduct additional searches. This safeguard is particularly significant given that, for the majority of individuals, the purchase of real property represents the single largest financial transaction of their lifetime.

When does the cooling off period start and end? 

The five-business-day cooling off period begins on the first business day after contracts are exchanged.

For example, if contracts are exchanged on a Wednesday, the cooling off period will usually expire at 5:00 pm on the following Wednesday (assuming no public holidays fall within that period).

Weekends and public holidays do not count as business days.

Your solicitor or conveyancer should confirm the exact expiry time so you do not accidentally allow the cooling off period to lapse.

What can you do during the cooling off period? 

Buyers are strongly encouraged to use this time to: 

1. Commission a building and pest inspection report from a suitably qualified inspector to identify any structural issues, defects, or pest activity that may affect the value or liveability of the property.
2. Confirm that your finance approval is unconditional — not merely pre-approval. Pre-approval is not a guarantee of funding, and proceeding without confirmed finance is a significant risk.
3. Obtain a strata report if purchasing a unit, townhouse, or property within a strata scheme. This report provides important information about the building's finances, any outstanding levies, current by-laws, and known defects. Note that strata reports can take time to obtain, so arrange this promptly at the start of the cooling off period.
4. Review the contract of sale with your solicitor or licensed conveyancer if you have not already done so prior to exchange.

What is the cost of pulling out during the cooling off period? 

If you elect to withdraw from the contract during the cooling off period, the vendor is entitled to retain the 0.25% cooling off fee. In exchange, you are released from the contract and can walk away without any further financial penalty.

If, however, you withdraw after the cooling off period has expired — once the contract has become unconditional — the consequences are significantly more serious.

You will likely forfeit your full deposit and may also be required to compensate the vendor for any losses arising from the failed sale. This can include the vendor's agent fees, legal costs, and any shortfall between your agreed purchase price and the price ultimately achieved if the property is later resold at a lower amount.

When does a cooling off period not apply? 

Auction Purchases

The most common situation in which no cooling off period applies is where a property is purchased at auction. When the hammer falls, the successful bidder is required to sign the contract and pay the full deposit — typically 10% — on the day. The contract is immediately unconditional with no right of withdrawal.

Waiver by agreement - Section 66W certificate

Outside of auctions, a buyer can also choose to waive their cooling off period by exchanging contracts with what is known as a Section 66W Certificate. This is a certificate signed by your solicitor or conveyancer confirming that they have provided you with legal advice about the contract and the implications of waiving the cooling off period.

Buyers sometimes offer to waive the cooling off period as a way of making their offer more attractive to a vendor, particularly in competitive markets. An unconditional exchange gives the vendor certainty that the sale will proceed, which can be a decisive factor when multiple buyers are competing for the same property.

You should only consider waiving your cooling off period after receiving independent legal advice, ensuring your finances are confirmed, and satisfying yourself about the condition of the property.

Can the cooling off period be extended? 

Yes, it can be extended if the following conditions are satisifed: 

1. the request is made before the cooling off period expires, it cannot be extended retrospectively.
2. Both parties must agree, the vendor is under no obligation to grant an extension.
3. The extension should be documented in writing and for best practice signed by both parties.

If the vendor refuses, the buyer must either proceed, rescind (and forfeit the 0.25%), or exchange unconditionally before expiry.

It is important to communicate early with your solicitor or conveyancer if you require an extension. Common reasons include a delay in obtaining unconditional finance approval or delays in receiving the building and pest inspection report. During this period, clear communication between all parties is key.

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This article is intended as general information only and does not constitute legal advice. If you are purchasing property in NSW, you should seek advice from a qualified solicitor or licensed conveyancer before exchanging contracts.

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