My parents have put a deposit on a house with a 5 day cooling off period, they have now reached day 7 and have decided not to go ahead with the purchase. I understand they will loose their deposit of circa $2000, but their lawyer is telling them that because they have not notified the vendor by the due date they could be liable for the difference in price of property sold. So if the property now sells for $50k less than they had offered, they will have to pay this difference.
is this correct?
i thought they would just lose their deposit of $2000?
You lose the deposit if you cancel within the cooling off period. If you go beyond that then you are in trouble.
Why did't their solicitor extend the cooling off period?
Regards
Shahin
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what do you mean exactly with "trouble"
they have gone 1 day over.
unfortunately I was not around to take them through the proper process and deal with the lawyers
Unfortunately your lawyer is correct …if you don't notify the vendor before the cooling period ends, it's atomically presumed your going ahead with the sale. So you may be liable for any short fall.
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Thanks guys.
Just to throw something in the works, they were told by the realestate agent that they will just lose their deposit if they dont go ahead by the cooling off period.
Also I read:
"NSW law provides for a cooling off period in contracts for the sale of residential property (fewer than 2.5 hectares) of five working days. The cooling off period ends at 5.00pm on the fifth working day. This means that after entering into the contract the purchaser has five working days in which to “cool off” (rescind). The seller is locked into the contract and cannot withdraw from the sale. If you rescind under your cooling of rights, it will cost you an amount prescribed by law – you forfeit to the seller 0.25% of the sale price. This means you lose $250.00 for each $100,000.00 in the purchase price (or part thereof). The contract is then at an end and neither party has any further claim against the other. Metro Conveyancing can explain the operation of and consequences of the use of the cooling of period.
Many vendors require buyers to waive the cooling off rights i.e. the purchaser agrees to sign without the right to rescind and is this immediately bound by the contract. This is done by having the waiving explained and by signing a s66W certificate declaring you have had the certificate explained and waiving the right to cool off. A cooling off period can be shortened or extended by negotiation with the seller’s solicitor or conveyancer and we can do that for you on instruction. A vendor, however, does not have to agree to extend a cooling off period."
Yes, looks like the parents are locked into the contract now.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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What has made them change their mind?
Did they sign 'subject to' any conditions? and has the contract gone unconditional yet?
they had some loan issues which isnt a big problem because there is a 7month settlement on the contract. they were just not advised by their lawyers properly and that is the issue.
the contract the lawyer wrote had no conditions such as "finance, building, pest"
very very frustrating.
they are now in a position where they have to go ahead with it, which isnt the worst problem in the world as they like the property, its just about getting the right approvals.
they are selling their house to a developer who has had council approve all plans in january, so if they decide to build in the next 6months then they are good to go, if not they will have to fort out mortgage insurance
Ok so correct me if I'm wrong guys, but if you have signed conditional on finance and have had issues with the finance then you should be able to void the contract…. What then would the penalties be?
If you sign an agreement subject to something occuring then if that something doesn't occur (such as finance approval) you can terminate the contract.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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That is of course assuming you notify the Seller that it hasn't been approved within the prescribed period.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
right, which is the date that the contract goes unconditional, not the 'cooling off' date. In my last experience the 'unconditional' date was around 2 weeks into a 30 day settlement period.
So, Sam, looks like your folks have an out if they want it. Will still cost them a bit I am sure, but gives you something to talk to the solicitor about.
If there is a subject to finance clause and you notify the vendor before the end of that clause date then you may be able to get out of the contract, but this will depend on the wording. You may have to provide proof of finance with ANZ being rejected for example.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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sam2011 wrote:the contract the lawyer wrote had no conditions such as "finance, building, pest"very very frustrating.
So you are saying there is NO subject to finance etc in the contract at all?
sam2011 wrote:Also I read:
This means that after entering into the contract the purchaser has five working days in which to “cool off” (rescind). If you rescind under your cooling of rights, it will cost you an amount prescribed by law – you forfeit to the seller 0.25% of the sale price. This means you lose $250.00 for each $100,000.00 in the purchase price (or part thereof). The contract is then at an end and neither party has any further claim against the other.
"
This sums it up. They didn't rescind. Hence their problem.
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