What happens if I pull out after exchange?

If you withdraw after exchange and outside the cooling-off period, the vendor can terminate the contract and forfeit your deposit (typically 10% of the purchase price). The vendor may also sue you for additional damages, including the difference if the property later sells for a lower price. The financial consequences can be severe.

Can I waive the cooling-off period?

In NSW, the cooling-off period can be waived by issuing a section 66W certificate, which requires your solicitor to confirm you understand the consequences. This is common at auctions and when the vendor requires immediate certainty. In Victoria, the buyer can request a shorter or longer cooling-off period, but it cannot be waived for private treaty sales.

Is the deposit refundable after exchange?

During the cooling-off period, you can withdraw but will typically forfeit 0.25% of the purchase price (not the full deposit). After the cooling-off period expires, the full deposit is at risk. If you withdraw due to a valid condition in the contract (e.g., subject to finance or building inspection), the deposit is usually refunded in full.

Do I need a conveyancer before exchange?

Yes, strongly recommended. Your conveyancer should review the contract of sale before you sign it to identify unfavourable clauses, missing conditions, or risks. Engaging a conveyancer after exchange limits their ability to negotiate amendments or protect your interests.

What is Exchange of Contracts? | Realestate Lens

Definition

Exchange of Contracts

Exchange of contracts is the point in a property transaction where the buyer and seller each sign identical copies of the contract of sale, the buyer pays the deposit, and both parties become legally bound to complete the transaction. In most Australian states, exchange marks the start of the cooling-off period.

Exchange is the critical milestone that turns a negotiation into a binding legal agreement. Before exchange, either party can walk away without penalty. After exchange, withdrawing from the contract carries serious financial consequences including forfeiture of the deposit and potential damages claims. Understanding what happens at exchange — and the differences between states — is essential for any Australian property buyer or seller. For a comprehensive breakdown, read exchange of contracts explained.

What Happens at Exchange

1
Contract review
Both parties’ conveyancers or solicitors review the contract of sale, negotiate any amendments to special conditions, and confirm all required vendor disclosures are attached.
2
Signing
The buyer and seller each sign their own copy of the contract of sale. In NSW, the buyer’s solicitor and seller’s solicitor physically or electronically exchange the signed counterparts.
3
Deposit payment
The buyer pays the deposit (typically 10% of the purchase price) to the vendor’s agent or solicitor’s trust account. A reduced initial deposit (e.g., 0.25% at exchange with the balance within 5 days) may be negotiated.
4
Cooling-off period begins
In most states, the cooling-off period starts at exchange. During this period, the buyer can withdraw by paying a small penalty (usually 0.25% of the purchase price). The cooling-off period does not apply to auction purchases.
5
Both parties are legally bound
Once exchange occurs (and after any cooling-off period expires), both parties are legally committed to completing the transaction on the agreed settlement date.

Exchange vs Settlement

Criteria	Exchange of Contracts	Settlement
When it happens	At the start of the transaction	Typically 30-90 days after exchange
What happens	Contracts are signed and deposit is paid	Full purchase price is paid and ownership transfers
Legal effect	Parties become legally bound to the contract	Legal ownership passes to the buyer
Deposit	Paid by the buyer into trust	Deposit is counted toward the purchase price
Can you withdraw?	Only during cooling-off (with penalty)	No — failure to settle is a breach of contract
Who coordinates	Conveyancers exchange signed contracts	Conveyancers, lender, and land registry coordinate funds and title transfer

State Variations

The exchange process differs significantly between Australian states:

NSW: Formal exchange of counterpart contracts is standard. The buyer and seller sign separate copies, and their solicitors exchange them. Cooling-off period is 5 business days (can be waived with a section 66W certificate).
Victoria: Similar to NSW — formal exchange of signed contracts with a 3 business day cooling-off period. The buyer may request an extension. No cooling-off at auction.
Queensland: Uses a single contract signed by both parties rather than exchanging counterparts. The contract becomes binding when the seller signs and communicates acceptance to the buyer. Cooling-off period is 5 business days.
South Australia: Similar to Queensland — a single contract approach. The cooling-off period is 2 clear business days from when the buyer receives a fully executed copy of the contract.
Western Australia: No statutory cooling-off period for private treaty sales. The contract is binding once signed by both parties and the buyer's offer is accepted.

Obligations After Exchange

Once contracts are exchanged and any cooling-off period has expired, both parties have binding obligations:

Buyer: Must arrange finance (if subject to finance, within the stated timeframe), complete building and pest inspections if required, and prepare for settlement by the agreed date.
Seller: Must maintain the property in the same condition as at exchange, not enter into any new leases or agreements affecting the property, and ensure all encumbrances disclosed in the contract are cleared by settlement.
Both parties: Must comply with all special conditions in the contract, cooperate to achieve settlement on time, and notify the other party of any issues that may affect completion.

Frequently Asked Questions

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