For many people buying a home can be a highly emotional experience. Invariably it is the largest financial outlay a person will make.There are not only financial consequences, decisions are being made about the very essence of a person’s lifestyle; where to live and all the implications of that choice.
Feelings of doubt, fear and mistrust culminating in bouts of anxiety is common during the buying process. People that are usually calm and rationale can become emotional and illogical, in short judgement becomes clouded.
Making the wrong property selection can have far reaching negative consequences. For home buyers it can lead to a less than ideal lifestyle and therefore effect a person’s general well being. For an investor it is will impact their financial situation and therefore limit future choices and opportunities.
In Victoria, Section 31 of the Sale of Land Act allows buyers to cool off within 3 clear business days of the day the contract is signed i.e. to end the contract for no reason. A buyers cooling off rights are subject to certain exceptions, e.g. buying a property at a publicly advertised auction.
Buyers can and do make spur of the moment decisions that are not thought through, decisions based on emotions, external pressure or simply just the wrong choice.
It is for those reasons, regulations that govern a buyer’s right to cool off should be enhanced and updated when required.
In Victoria when a buyer exercises their cooling off rights they are penalised $100 or 0.2% of the purchase price, whichever is the greater. This regulation is out dated and should be changed. The $100 penalty has become obsolete as property prices have risen substantially since cooling off legislation was enacted.
This means that buyers are being penalised 0.2% of the purchase price if they choose to cool off.
As an example, at the current Melbourne median house price of $1,072,500 buyers are being penalised $2,145 as a consequence of cooling off. Buyers should not be punished by having to pay a substantial amount of money simply because they have made an impulsive decision to sign a contract that they immediately realise was done without due consideration.
That is not how cooling off legislation was meant to operate!
