Cooling off periods and gazumping
JOHN and Cynthia have been looking to buy a home for some time.
They missed out on a number of properties where other purchasers exchanged contracts before proper inquiries could be made such as obtaining pest and building reports and getting legal advice on the contract.
This is what is referred to as gazumping.
The pair eventually find an ideal property and want to make sure they secure the property.
The real estate agent advises them they can secure the property by signing and exchanging contracts with a cooling off period of five working days.
Rather than paying the usual 10% deposit they only have to pay 0.25% of the purchase price which on this occasion is $1250 on a property of $500,000.
The agent explains to John and Cynthia that if they cool off within those five working days, the most they will lose is the $1250.
So they go ahead and exchange contracts in the real estate agent's office, before heading off to immediately see their solicitor who commissions the pest and building reports and carefully reviews the contract.
Their solicitor explains if for some reason these reports cannot be obtained within the five working day period, the vendor may agree to increase the cooling off period.
Fortunately for John and Cynthia, they receive satisfactory reports within the five working days and are satisfied with their solicitor's advice on the contract.
They pay the balance of the 10% deposit to the real estate agent before the cooling off period expires and are very happy they didn't miss out on their dream property.
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