Exchange of Contracts in NSW: What Buyers and Sellers Need to Know
Exchange of contracts is one of the most misunderstood stages of a property transaction in New South Wales — and also one of the most important.
Many buyers assume that once an offer is accepted or a deposit is paid, the deal is locked in.
In NSW, that is not the case.
A contract only becomes legally binding when contracts are exchanged, and there are different ways exchange can occur, each with very different legal consequences.
What Does “Exchange of Contracts” Mean?
In NSW, a property contract becomes binding only when:
identical copies of the contract are signed by both parties, and
those contracts are formally exchanged
Before exchange:
either party can usually walk away
After exchange:rights change immediately
financial consequences apply
This is why exchange is often referred to as the point of no return.
The Three Ways Contracts Are Exchanged in NSW
1. Exchange With a Cooling-Off Period
This is the most common method for residential purchases.
In most cases:
the purchaser receives a 5 business day cooling-off period
the purchaser may rescind during this time
0.25% of the purchase price is forfeited if they do
Cooling-off is often misunderstood.
It is not a free exit and does not protect against:
finance issues after the period ends
defects discovered later
risks accepted under special conditions
2. Exchange With a Section 66W Certificate
A section 66W certificate is issued by a solicitor acting for the purchaser.
When a valid certificate is provided:
the cooling-off period is waived
the contract becomes immediately unconditional
This method is commonly used where:
sellers want certainty, or
buyers feel pressure to proceed quickly
However, it carries significantly higher risk and should never be treated as routine.
3. Exchange at Auction
At auction:
contracts are exchanged the moment the hammer falls
there is no cooling-off period
the deposit is payable immediately
From a legal perspective, buying at auction has the same effect as exchanging with a section 66W certificate.
All due diligence must be completed before auction day.
Why the Method of Exchange Matters
The way contracts are exchanged determines:
whether a purchaser can withdraw
how much financial risk is involved
when default consequences apply
Once cooling-off is removed, risk increases immediately and significantly.
This is why clear advice before exchange is critical.
Final Thought
Exchange of contracts is not a formality.
It is the moment when legal and financial risk becomes real.
Whether you are buying or selling property in NSW, understanding how exchange works — and which method is being used — can make all the difference.
If you’re unsure, get advice early.
After exchange, many decisions can’t be undone.
Need Advice?
Our team assists buyers and sellers across NSW to:
understand exchange options
manage risk
avoid costly mistakes
📩 Get in touch before exchange — not after.
