Buying a property is a significant commitment, one that involves careful consideration and often substantial financial sacrifice. A cooling-off period provides an important safety net for buyers, allowing them to withdraw from the purchase contract for any reason within 5 business days, only forfeiting 0.25% of the purchase price (also known as holding deposit) . To assist our future clients in making the right decision, we have compiled a list of the top 5 reasons why you might want to consider rescinding a contract during the cooling-off period expires:
1. Inability to Secure Finance
This has to be one of the most common reasons for rescission during the cooling off period. Despite receiving a pre-approval, your lender might still decline your loan application due to reasons like a change in your financial situation or a lower-than-expected property valuation. If you cannot secure an unconditional loan approval prior to the expiration of the cooling off period, it may be best to rescind the contract.
2. Emotional Purchase
In the current state of the economy, there can be little doubt that property purchases can be emotional. Buyers are always looking for the perfect purchase – good location, not too expensive and big enough to live in. Sometimes purchasers make the wrong assessment when guided by emotions. If you feel your decision was more emotional than rational, rescinding the contract during the cooling-off period can save you from a potentially regrettable decision.
3. Unsatisfactory Strata, Pest or Building Reports
If you're purchasing a strata title, a strata report can reveal red flags like financial mismanagement, substantial upcoming levies, or ongoing disputes. Meanwhile a building report can reveal major structural issues with the dwelling or significant hidden building defects. One of the most common reasons to rescind a contract is discovering serious structural issues or pest infestations during a property inspection. Resolving these issues can be time-consuming and expensive, and it may not be a burden you're willing to shoulder. If these reports are not satisfactory, rescinding the contract may often be a wise choice.
4. Sudden Change in Circumstances
Unexpected life events like job loss, illness, or family emergencies may also affect your ability to follow through with the purchase. Although quite unlikely to occur during the cooling off period, these things do happen and often warrant the rescission of the contract.
Though property markets are often resilient, signs of an imminent downturn could make a purchase risky. If economic forecasts are suddenly unfavorable, you might consider rescinding the contract to avoid potential financial loss. An example of this would be purchasing a property at the start of the COVID19 pandemic in areas prone to downturns in price and rescinding the contract only to be able to purchase the same or comparable property for significantly less.
5. Various Legal Issues with the Property
Following exchange of contracts, it is not uncommon that some serious unresolved legal issues get uncovered, such as ownership disputes or building compliance issues. In rare situations a caveat can be lodged against the property by third party creditors to secure payment from the vendors.
Furthermore, Vendors are obliged to provide a full disclosure of the property. If you discover the vendor has knowingly withheld information about the property or provided misleading information, you have the right to rescind the contract.
These issues can create significant complications for the purchasers and affect the actual value of the property. If significant legal issues are discovered after the exchange, you may choose to rescind the contract to avoid these complications.
The cooling-off period provides a safety net for buyers to reassess their decision and, if necessary, to rescind the contract. It is often prudent to seek an extension of the cooling off period through your solicitor or conveyancer if you are concerned about any of the above factors.
It’s always advisable to seek professional advice from an experienced lawyer or conveyancer before rescinding the contract. Surge Legal has years of experience in conveyancing matters and we will safeguard you from common mistakes and pitfalls when purchasing a property and safely guide you to a successful purchase of your dreams. Remember, buying a property is not just a substantial financial commitment, but also an emotional one, and it's crucial to ensure you're making the right decision.