The Secret Cost of Changing Your Mind After Signing a Contract

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Buying a property is a big commitment—and sometimes, after signing, you start to second guess. The home inspection raises concerns. Your finance falls through. A better property pops up.

But in Victoria, once you’ve signed a contract of sale, you’re locked in—and backing out can come at a serious financial cost.

David Dawn, Licensed Conveyancer at Victorian Property Settlements, outlines the real consequences of changing your mind after signing and what options (if any) buyers have.

You Have Limited Rights to Walk Away

In most cases, once you sign a contract for residential property in Victoria:

  • You’re bound to complete the purchase

  • You cannot just “cancel” because you’ve changed your mind

  • The vendor can enforce the contract or sue for losses

That means if you do not proceed to settlement, the vendor can keep your deposit—and potentially claim more.

What About the Cooling-Off Period?

Yes, there is a cooling-off period for some buyers—but only if all the following apply:

  • The property is residential

  • You are not buying at auction (or within 3 days of a scheduled auction)

  • You are buying as an individual (not a company or trust)

  • You cancel within 3 business days of signing

Even then, the vendor is entitled to retain 0.2% of the purchase price—and many contracts contain language that removes or restricts the cooling-off right.

Tip: Do not rely on the cooling-off period as a safety net.

What Happens If You Just Do Not Settle?

If you fail to settle on time without a valid reason, the vendor can:

  1. Issue a Notice of Default giving you 14 days to complete

  2. If you still do not settle, the vendor can:

    • Terminate the contract

    • Keep your deposit

    • Sue you for damages, including resale losses and holding costs

The contract may also include penalty interest—often 10 percent or more—accruing daily.

Real Example

A buyer signs a contract for a $970,000 home in Mount Eliza but backs out when their preferred lender declines finance. They had not included a finance clause. The vendor resells three months later for $930,000.

Result: The vendor sues the original buyer for:

  • The $97,000 deposit

  • The $40,000 resale loss

  • $18,000 in holding costs and legal fees

The court rules in the vendor’s favour.

Valid Reasons You May Be Able to Exit

You might have a lawful way to cancel if:

✅ The vendor has breached a condition of the contract
✅ A subject to finance clause was included and not satisfied
✅ The building or pest report triggers a valid right to rescind
✅ The vendor failed to make proper Section 32 disclosures (under the Sale of Land Act)

But even then, the exit must be handled correctly—with written notice and full legal backing.

Don’t Assume You Can Back Out

Many buyers mistakenly believe that:

  • The deposit is “just a gesture”

  • They can “talk their way out of it”

  • The agent will let them change their mind

This is false. Once the contract is signed and dated, it is a legally binding agreement. Defaulting puts your money, credit rating, and future borrowing at risk.

Conclusion

Changing your mind after signing a contract is not a simple matter in Victoria. Unless a valid contractual condition applies, you are expected to settle—and walking away could cost you dearly.

At Victorian Property Settlements, we advise buyers before they sign, help negotiate appropriate clauses, and act swiftly if something goes wrong.

The key is to get advice early—before a costly mistake is made.