The rules involved in the cooling off period

We’ve noticed an increasing trend in the requests for private treaty buyers to complete a 66W certificate which waives the standard 5 day cooling off period. In our current real estate market in Sydney and the Central Coast, some vendors and their agents are asking for these conditions being in a ‘seller’s market’ and to ensure a fast sale. With people eager to close on properties, many buyers are accepting this condition but there are situations when completing a 66W certificate is not ideal.

What is a 66W certificate?

A 66W certificate waives the buyer’s cooling off period. Standard cooling off periods are 5 business days from the exchange of contracts (when the vendor and buyer have agreed on price and other various conditions). These are common in an auction process but traditionally less common in a private treaty sale.

Once a buyer signs a 66W certificate, they cannot change their mind on purchasing the property without losing their 10% deposit.

The risks in waiving your cooling off period

The biggest risk when signing a 66W is the potential to lose your 10% deposit. This can be a major financial setback for the buyer, not to mention heartbreaking too.

Securing finance

If you’ve already secured pre-approved finance, the cooling off period is used to move your loan to unconditional or formal approval. Your lender or bank will value the property under contract to make sure what you are paying for it matches its value. If the lender or bank values the property lower than what you wish to borrow you may need to approach another lender/bank and begin the approval process again or find the cash yourself to make up the shortfall. As some lenders/banks can take more than 5 business days to complete their assessment, we recommend requesting an extension to 10 business days prior to signing the contract which you can do during the negotiation stage with the agent.

If you purchase a property at auction, no cooling off period applies and you will be bound to the contract as soon as ‘sold’ is called. Even under auction conditions, the lender/bank will seek a valuation of the property and if the valuation is lower than what you paid, you’ll need to renegotiate your finance or source the additional funds yourself.

If you have provided a 66W and rescind the contract the penalty as per the contract will apply - often 10% of the purchase price.

If you are within the cooling off period (you did not sign a 66W) and rescind the contract you will forfeit 0.25% of the purchase price.

As you can see that’s a considerable amount of money to risk.

Pest and building inspections

Waiving your cooling off period may mean that you don’t have sufficient time to complete a pest and building inspection. Often the most expensive building repairs are for items you can’t see. You may need to pay for a pest and building report prior to your offer even being accepted. At around $300-500 each, you don’t want be doing that too many times.

Why would the vendor and real estate agent want you to sign a 66W?

  • If there are numerous bidders vying for the property, signing a 66W will show the vendor/s you’re serious and there are no apparent reasons why you would  rescind the contract
  • It gives the vendors instant closure - the property is officially sold
  • Agents know their job is complete and generally there is no reason why the property would go back on the market, requiring more negotiations with other purchasers

When should you waive your cooling off period?

  • If you can afford to lose your 10% deposit, should you not be able to secure finance before settlement
  • If you have sufficient cash/savings to purchase the property outright without a loan
  • If you have already done your preliminary checks as part of the due diligence process (ie pest and building report) and you are satisfied with the risk

You should never feel bullied into signing a 66W. If you don’t feel 100% comfortable in signing one, you should be prepared to walk away from the property.

As finance brokers, we’ve heard some horror stories of people losing their deposits because they haven’t been able to secure finance. Before you exchange contracts and particularly before you sign a 66W certificate, talk to Zac about your current situation and the best course of action to ensure that when you find the right property for you, you can proceed with confidence and limited risk. 

To learn more about how Mint Equity can help, contact Zac on 0402883450