Buying property is one of the most significant financial decisions you will make. Whether it is your first home or your next investment, understanding how the purchase process works in NSW is an important first step.
In NSW, there are three main ways a property purchase can proceed, and each one carries different obligations, timeframes, and levels of risk. Knowing the differences helps you prepare properly and protect your interests before you commit.
1. Exchanging Contracts with a Cooling-Off Period (Private Treaty)
This is the most common method of buying property in NSW. The buyer and seller each sign identical contracts, which are then exchanged. The real estate agent typically facilitates the exchange, with lawyers or conveyancers completing the formal steps afterwards.
After exchange, the buyer has a cooling-off period. In NSW, this is typically five business days by law, though it is often extended to ten business days by agreement between the parties.
During the cooling-off period, the buyer can withdraw from the purchase for any reason. Common reasons include a loan application not being approved, concerns arising from building, pest, or strata inspections, or simply a change of mind.
At the point of exchange, the buyer pays a deposit equal to 0.25% of the purchase price. If the buyer chooses to withdraw during the cooling-off period, the seller is entitled to keep that 0.25% deposit.
The cooling-off period gives the buyer time to complete important tasks such as finalising loan approval, obtaining legal advice on the contract, and arranging building, pest, strata, or other inspections.
2. Exchanging Contracts with a Section 66W Certificate (No Cooling-Off Period)
This method follows the same process as a standard private treaty exchange, but with one key difference: there is no cooling-off period.
A section 66W certificate is signed by the buyer’s solicitor, and the contract becomes unconditional immediately upon exchange. Neither party can withdraw, and the full 10% deposit (or another amount agreed between the parties) must be paid by the buyer at exchange.
Because both parties are immediately locked into the transaction, the buyer must complete all due diligence before signing the contract. This includes having the contract reviewed by their solicitor, arranging all necessary inspections, and, if the buyer is obtaining finance, securing formal unconditional loan approval.
3. Buying at Auction
The third way to buy property in NSW is at auction. If you are the highest bidder and the auctioneer accepts your bid as the final bid (known as the “fall of the hammer”), you are committed to the purchase immediately. The buyer then signs the contract and pays the deposit on the spot.
As with a 66W exchange, there is no cooling-off period when buying at auction. This means all due diligence, including contract review, inspections, and any negotiations about terms, must be completed before you bid.
Choosing the Right Approach
Each method of purchase carries different levels of risk and preparation. A cooling-off period provides a safety net for buyers who need time to finalise their finance or inspections. A 66W exchange or auction purchase requires thorough preparation upfront but can offer advantages in a competitive market.
Whatever method applies to your situation, having experienced legal guidance before you commit helps ensure your interests are protected from the outset.
Need Help with a Property Purchase?
Buying property involves important legal obligations. If you are thinking about buying or selling property and want clear, practical advice on the process, contact our experienced property law and conveyancing team to discuss your situation.
