Generally you are able to change your mind any time before the contracts are exchanged. Once contracts are exchanged you are legally bound and can only get out of the contract in limited circumstances. An example of this may be if a member of either party becomes mentally ill.
So, when you are buying a house it pays to do your due diligence before you exchange contracts. This may include obtaining a building and pest report, strata report or simply undertaking your own thorough inspections.
You should also make sure your conveyancer scrutinises the contract on your behalf to make sure all the details are correct and that you fully understand the terms and conditions it contains. This includes reviewing the property titles and certificates, raising any issues of council compliance and discussing the effect of easements and restrictions.
As a purchaser, if you pull out of the contract after exchange you will forfeit part or all of your deposit paid. This can be different if you have a cooling off period which leads into our second question:
What is a cooling off period?
A cooling off period is a period of time after exchange of contracts, usually five business days, during which time the purchaser may pull out of the contract and only forfeit 0.25% of the purchase price rather than forfeiting the full 10% deposit paid.
The cooling off period is provided by legislation for residential properties. It does not apply to rural properties over 2.5 hectares or commercial properties.
A cooling off period is for the purchasers benefit and does not benefit the vendors. This means that once contracts have exchanged the vendors are bound to sell to that purchaser.
In practice vendors often request the purchaser agree to waive their cooling off period.
Please note the answers provided are for your general information only and we ask that you call our office on 02 6331 2911 to obtain detailed legal advice for your individual situation.
Rachael Thurn | Property Conveyancer