KEY TAKE OUT:
- What is an Agent exchange?
- What is a Solicitor exchange?
- What is the difference between Contracts exchange with or without a cooling off period?
- What is required before Contracts can be exchanged?
Agent exchange vs solicitor exchange. What is the difference?
Contracts for the sale of residential property can be exchanged via a Real Estate Agent or via a Solicitor/Conveyancer. You may have heard the terms ‘Agent exchange’ or ‘Solicitor exchange’ before. Let’s explore each of these types of exchange.
Generally, an exchange of Contracts with a cooling off period is completed by the Real Estate Agent and referred to as an ‘Agent exchange’. In saying this, Contracts can be exchanged by a solicitor/conveyancer subject to a cooling off period if no certificate waiving the Purchaser’s cooling off rights has been provided.
When Contracts are exchanged with a cooling off period, the Purchaser pays a 0.25% deposit (often called a ‘holding deposit’) to the Vendors Real Estate Agent’s trust account. If the Vendor doesn’t have an Agent or their Agent doesn’t operate a trust account, the holding deposit is paid to the Vendors Solicitor/Conveyancer’s trust account. Exchange in a cooling off period secures the property i.e. takes it off the market, for the duration of that cooling off period. During this time, the purchaser can finalise their loan approval and obtain pre-purchase inspections (such as pest and building or strata inspection reports). The Purchaser can rescind (cancel and get out of the Contract) for any reason during the cooling off period. The Vendor does not have a reciprocal right. If the Purchaser elects to rescind the Contract during the cooling off period, the 0.25% deposit is forfeited to the vendor as compensation for having the property off the market.
The cooling off period is required to be a minimum of 5 business days. In our experience, in the majority of cases, the Purchaser will ask for a 10 business day cooling off period to allow them additional time to complete their due diligence and obtain unconditional loan approval.
The cooling off period forms part of the completion period i.e. the completion period is calculated from the exchange date and not the date the cooling off period expires. This is a common misunderstanding. For example, if the Contracts were exchanged on 21 August 2023 with a 5 day cooling off period and a 42 day completion period, the key dates would be as follows:
Exchange Date: 21 August 2023
Cooling off period expiry date: 28 August 2023
Completion Date: 2 October 2023
The completion date is not 42 days after the cooling off period has expired, it’s 42 days after the exchange date.
The cooling off period can be extended by mutual agreement. If the cooling off period is extended, the completion date is not automatically extended and remains the same. In the example above, if the Purchaser requested an extension to the cooling off period until 30 August 2023 and the Vendor agreed, the cooling off period expiry date would be extended to 30 August 2023 and the completion date would remain 2 October 2023.
A cooling off period does not apply to all properties. A cooling off period does not apply to properties with a land area size over 2.5 hectares, to commercial properties or to properties sold at auction.
Generally, a ‘solicitor exchange’ (which can be completed by a Solicitor or Conveyancer) involves Contracts being exchanged without a cooling off period. In order for Contracts to be exchanged unconditionally (without a cooling off period), the Purchaser’s Solicitor/Conveyancer must provide the Vendors Solicitor/Conveyancer with a certificate waiving the Purchaser’s cooling off rights. This certificate is called a 66W Certificate.
Where Contracts are required to be exchanged without a cooling off period (i.e. unconditionally), the purchaser will be required to complete their due diligence and ensure their finance is unconditionally approved prior to the Contracts being exchanged because once exchanged, they are locked in with no option to rescind (cancel). Prior to exchange, the Purchaser must pay the full deposit (usually 10% of the price) to the Vendors Real Estate Agent’s Trust Account. If there is no Agent, the full deposit is paid the Vendors Solicitor/Conveyancers Trust Account.
For the duration of time the Purchaser takes to complete their due diligence and obtain unconditional loan approval, the property remains on the market and the Vendor can accept offers from other prospective Purchasers.
Coutts is here to help
Navigating property contract exchanges can be complex, whether you’re considering a cooling-off period or an unconditional exchange. At Coutts, we’re here to provide you with tailored insights, ensuring your property journey is seamless and well-informed. Reach out to us today to navigate property exchanges with confidence and clarity, backed by our expertise. Contact us today!
ABOUT MELINA COSTANTINO
Melina joined the Coutts team in 2010 working as a Licenced Conveyancer within our Property & Conveyancing team, based out of our Campbelltown office. Her commitment to client services saw her progress further and into the role of a Senior Licensed Conveyancer in July 2022.
She graduated with a distinction in the Advanced Diploma of Conveyancing and is accredited with the Australian Institute of Conveyancers NSW.
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This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.