Purchasing a home can be one of the biggest decisions you make in your adult life, so asking can a buyer pull out of an unconditional contract is a question you probably want to avoid in your process of purchasing.
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What is an unconditional contract of sale?
Hearing the word ‘unconditional’ usually sets people on edge. Unfortunately, an unconditional contract of sale implies just that – signing a contract as it stands without any of your own conditions in place.
The way an unconditional contract works is that you and the seller agree on a price, sign the contract on both ends with no questions asked, and then follow through by paying your deposit, which is typically 10-20% of the agreed-upon price.
If anything goes awry, you may ask the question on everyone’s minds: can a buyer pull out of an unconditional contract? Trust us, you’re not alone in your query.
This is when the cooling-off period comes into play. Most people can get out of their unconditional contracts at this time, receiving most, if not all, of their deposit back.
Unfortunately, there are some conditions to the cooling-off period.
What is a cooling-off period?
Depending on where you live, if you are even given a cooling-off period, and how long it can last, the complicated question of can a buyer pull out of an unconditional contract can be answered.
A cooling-off period is essentially when the buyer is given a few days to withdraw from the sale, avoiding any financial or legal consequences. It gives them the chance to pull out if problems arise or they are second-guessing their decision.
It typically starts on the day of the exchange and ends 3-5 business days later. Depending on the case, you can ensure that there is a required statement about the cooling-off period, alter this time, or withdraw from the contract altogether.
Cooling off periods in different states
As always, though, it’s dependant on the state you live in. For example, in New South Wales, Queensland, and Australian Capital Territory you are given five business days, but you also have to forfeit 0.25% of the sale price if you decide to pull out.
In Victoria, you can have a cooling-off period of three business days, but you must forfeit 0.2% of the purchase price. In South Australia, though, you are given a cooling-off period of two business days and must only pay $100 of your deposit if you decide to cancel the purchase.
As for Tasmania, there is no possibility of a cooling-off period for any sale. This is similar to Western Australia except when the buyer and seller agree to add it to the contract.
Lastly, in the Northern Territory, the cooling-off period lasts for four business days, and you can receive a full refund of your deposit.
How to withdraw during a cooling-off period
So the ultimate answer to the question, can a buyer pull out of an unconditional contract, is, simply put, yes! Knowing how to go about it is key.
To officially withdraw from a house sale, you must first contact the seller’s agent. This is because you have to give them a letter with an overview of your intention to withdraw from the sale.
Whether you want to write it or you want to get your conveyancer to do so for you, the letter must be delivered via email, mail, fax, or in-person before the end of the workday of the final day of the cooling-off period.
When can you change your mind?
If you are worried about changing your mind last minute, you should consider what kind of contract you signed. The question of can a buyer pull out of an unconditional contract is best answered case-by-case.
Before doing anything, make sure to look at the way your contract works and if it is conditional or unconditional. If it is an unconditional contract, the next step is to look at your state’s cooling-off period parameters.
A conditional contract involves being able to set your own conditions. The conditions you set and how much leeway you give yourself may play a role in resolving your later hesitance to purchase.
Pulling out before settlement
Between the time that you have signed an unconditional contract and officially settle into your new home, a lot can change. You may face financial roadblocks, learn new and unsettling information about your new home, or even simply change your mind.
Because the sales process can change at such a fast pace, in order to minimise consequences, pulling out after the cooling-period ends and before the settlement is not recommended. In other words, your pockets will probably start hurting because of your too-late decision.
Asking yourself the question, can a buyer pull out of an unconditional contract, should come up before the cooling-off period. Anything after will require serious financial repercussions.
Depending on the sale contract and what was outlined, you can potentially lose your full deposit, be asked to compensate the seller for expenses that they had to pay regarding the sale, and even face legal action to force your completion of the process.
Whatever it may be, it is best to face this heavy question head-on and sooner rather than later to avoid an even bigger headache later.
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