How to Back Out of a Property Contract — and When It's Too Late

 
 

Signing a property contract is a serious commitment in Victoria — and backing out isn’t easy. There are limited circumstances where you can terminate a contract lawfully, but outside of these, pulling out may cost you your entire deposit (and more). Here’s what you need to know.

1. Cooling-Off Period (for Private Sales Only) Buyers in Victoria have a 3-business-day cooling-off period after signing a contract — but only for private sales (not auctions). If you back out during this time:

  • You must give written notice

  • The vendor can keep $100 or 0.2% of the purchase price (whichever is greater)

You cannot rely on the cooling-off period if:

  • The property was purchased at or within 3 days of a public auction

  • You are a real estate agent or experienced property investor (with relevant exemptions)

2. Finance Clause (If Included) If your contract includes a valid subject-to-finance clause and:

  • You genuinely apply for finance

  • Your loan is declined in writing

  • You notify the vendor in writing before the finance date expires

Then you may validly terminate the contract and recover your deposit.

If you miss the deadline or don’t follow the notice rules, you may be bound to settle regardless.

3. Building and Pest Inspection Clause If the contract includes a building and pest condition, you can generally withdraw only if:

  • Major structural defects or active infestations are identified

  • You provide the report and formal notice in time

Cosmetic issues are not enough. And if you don’t give notice by the deadline, the clause is waived.

4. Material Breach by the Vendor You may be able to back out if the vendor:

  • Fails to disclose material issues in the Section 32 Vendor Statement

  • Can’t deliver title, clear possession, or comply with settlement conditions

  • Breaches contract terms in a way that goes to the root of the agreement

Legal advice is essential here — not all breaches justify termination.

5. Mutual Agreement Both parties can agree to cancel the contract, but the vendor is not required to consent. This often involves negotiation or compensation.

6. When It’s Too Late You cannot cancel a contract simply because you change your mind. If you try to withdraw outside of the permitted grounds, the vendor can:

  • Keep your deposit

  • Sue you for damages

  • Force you to settle (via specific performance)

How We Help At Victorian Property Settlements, we:

  • Review contracts to confirm your exit rights

  • Handle notices for finance or inspection clauses

  • Negotiate mutual rescission when possible

  • Warn buyers when they are out of time

Click here to request urgent advice if you’re unsure whether you can still pull out of a contract.

Victorian Property Settlements – Trusted for over 25 years by Victorian buyers and sellers. Visit: www.victorianpropertysettlements.com.au