What is the exchange of contracts in NSW?
The term “Exchange” describes the process of both parties signing and providing their signed Contract of Sale to the other party, with the intention of being legally bound. It is the point of no return — before exchange, nothing is committed; after exchange, both parties are.
In New South Wales, the exchange of contracts is the moment a property transaction becomes legally binding on both parties. Until exchange, neither you nor the vendor has any obligation to proceed — either party can walk away without legal consequence. Once contracts are exchanged, that changes entirely.
Two identical copies of the Contract for Sale and Purchase of Land are prepared by the vendor’s solicitor. You and the vendor each sign one copy, and those copies are then physically or electronically “exchanged” — you end up holding the copy signed by the vendor, and they hold yours. The contract is dated at exchange, and from that moment, you are both legally committed.
With the majority of contracts now handled electronically, it is increasingly common for agents to have both parties sign the same electronic document online — via DocuSign or a similar platform — rather than signing two separate identical copies. If this happens, make sure your solicitor confirms the exact moment exchange is taken to have occurred, as this affects when your cooling-off period starts running.
Before you exchange: what to do first
Rushing into exchange without preparation is one of the most common and costly mistakes NSW buyers make. You should have all of the following in place before you even consider exchanging.
Get the contract reviewed
The vendor’s solicitor prepares the contract — it is written in their client’s interests, not yours. A solicitor acting for you reviews every clause: special conditions, inclusions, settlement date, zoning certificate, title documents, and any easements. At West Legal & Associates, your first contract review is free.
Arrange building & pest inspections
Once you have the contract (which agents must provide at inspection), arrange a building and pest report — and for strata properties, a strata inspection report. If issues arise, your solicitor can negotiate amendments or a price adjustment before exchange.
Organise formal finance approval
Exchange commits you financially. Ideally obtain formal finance approval before exchanging. NSW contracts rarely include finance conditions, so you generally cannot exit if your loan is declined after exchange.
Have your deposit ready
You need 0.25% of the purchase price at exchange if exchanging with a cooling-off period, or the full 10% if exchanging unconditionally. Deposits are usually held in the agent’s trust account until settlement.
Negotiate any amendments
Your solicitor may negotiate changes to the contract on your behalf per your instructions: adjusting special conditions, the settlement period, price reductions for defects, or ensuring chattels and inclusions are clearly listed — before you commit.
How exchange actually works in NSW
Most NSW property exchanges today happen electronically. Rather than a physical handover of paper, your solicitor scans your signed contract and sends it to the vendor’s solicitor (after you have confirmed that you have paid your deposit). Then the vendor’s solicitor dates an identical contract signed by the Vendor and sends it over to your solicitor — exchange is complete.
In a lot of cases, the real estate agent will facilitate the signing and exchange of contracts via the use of an electronic signing platform such as DocuSign. Whilst practice dictates that separate identical contracts are to be signed by the Vendor and Purchaser and ‘exchanged’, it is common for real estate agents to have the Parties sign the one single contract, with each Party being provided with a copy of the electronically signed Contract of Sale.
When dealing with an agent facilitated exchange, before signing — check that the amendments that were agreed between your solicitor and the Vendor’s solicitor have been incorporated into the contract of sale and that a copy of that email trail between the Parties’ solicitors is annexed to the contract to be binding.
The cooling-off period explained
Under section 66S of the Conveyancing Act 1919 (NSW), every purchaser of residential property is entitled to a 5 business-day cooling-off period beginning from the moment of exchange. You can rescind the contract for any reason by serving a written Rescission Notice on the vendor before 5 pm on the fifth business day.
If you need more than 5 business days — for example, to obtain unconditional finance approval — your solicitor can request an extension in writing. The vendor is not obliged to grant it. The request must arrive before 5 pm on the fifth business day. Never assume an extension will be agreed.
What it costs to rescind
Cooling-off rights are not free. If you rescind during the period, you forfeit 0.25% of the purchase price to the vendor. On a $1.5 million Sydney property, that is $3,750. Any deposit paid above 0.25% must be returned to you within 14 days. Your solicitor will prepare the necessary Rescission Notice which must be officially served upon the other side before the expiration of the cooling off period.
When does the cooling-off period not apply?
No cooling-off when…
- You purchase at auction
- You purchase on auction day (passed in)
- You provide a Section 66W Certificate signed by your solicitor
What is a section 66W certificate?
A section 66W certificate is signed by your solicitor confirming they have explained the effect of the contract to you and that you knowingly waive your cooling-off rights. When this certificate is handed to the vendor at (or before) exchange, the contract becomes immediately unconditional — there is no cooling-off period.
In competitive Sydney markets, vendors and their agents regularly insist on a 66W certificate as a condition of accepting your offer. It gives the vendor certainty the sale is locked in from day one. This is especially common where the property has attracted multiple buyers.
Exchanging with a 66W certificate means you are immediately and unconditionally bound. If you cannot complete — finance fails, change of circumstances, anything — you stand to lose your full deposit and may be liable for any further losses and damages incurred by the Vendor. Do not agree to provide a 66W certificate unless finance is approved and all inspections and due diligence is complete.
The deposit: what you need to pay
The deposit is your initial financial commitment. The standard amount in NSW is 10% of the purchase price, though a reduced deposit (commonly 5%) may be negotiated with the vendor’s agreement. Importantly, this must be agreed to in writing by the Vendor or their Solicitor (not their Agent).
Exchanging with a cooling-off period
You pay 0.25% of the purchase price as a holding deposit at exchange. The balance (to reach the agreed total deposit, usually 10%) is payable before the cooling-off period expires at 5 pm on the fifth business day.
Exchanging unconditionally (66W or auction)
The full deposit — typically 10% (unless negotiated prior in writing to be a lower amount) — is payable when you sign the contract immediately at exchange, typically to the real estate agent’s trust account. Funds must be in position before exchange takes place.
Deposits are held in the real estate agent’s trust account (or the vendor’s solicitor’s trust account) until settlement. If the vendor defaults, your deposit must be returned to you.
Buying at auction: no cooling-off period
If you purchase at auction in NSW — or on the same day the property was passed in — there is no cooling-off period. The moment the hammer falls, you are unconditionally bound. The full 10% deposit is payable immediately on the day.
This means everything must be sorted before you bid:
Pre-auction checklist
- Contract reviewed by your solicitor
- Unconditional finance approval in hand
- Building & pest inspection complete
- Strata report reviewed (if applicable)
- Full 10% deposit funds ready immediately
- Contract amendments agreed in advance
- Settlement date negotiated with the agent
- Your maximum bid firmly decided
Contact us before auction day. We can review the contract and negotiate amendments with the vendor’s solicitor in advance — a longer settlement period, special conditions, listed inclusions — so you are fully protected from the moment the hammer falls.
What happens after exchange?
Once contracts are exchanged, the conveyancing work intensifies. Here is what your solicitor manages between exchange and settlement.
Property searches are ordered
Your solicitor orders title searches, council rates, land tax, sewer and drainage diagrams, roads and easements, and where relevant, strata records — confirming there are no outstanding orders, encumbrances, or proposals affecting the property.
Stamp duty (transfer duty) is assessed
Transfer duty is payable within 3 months of the contract date or settlement, whichever occurs first. Your solicitor informs you of the amount, considers any first home buyer concessions or exemptions, and assists process the payment with Revenue NSW prior to settlement.
Settlement figures and adjustments
Your solicitor liaises with your lender and also adjusts the rates, levies, rent and land tax by obtaining and applying for searches and certificates from various authorities such as the council, water and if applicable, strata manager. If you are also selling, sale proceeds are coordinated to fund the purchase simultaneously.
Pre-settlement inspection
You are entitled to inspect the property in the 3 days before settlement, confirming it is in the same condition as at exchange, subject to fair wear and tear — all inclusions present, no damage, all chattels specified in the contract remaining.
Settlement via PEXA
All NSW property settlements are now completed electronically through PEXA. Your PEXA-certified solicitor manages the digital workspace, confirms figures with all parties, facilitates the transfer of the balance purchase price, and the transfer of title is registered. When settlement completes, the property is yours.
Buying property in NSW? Get your contract reviewed by a senior solicitor. We’ll explain every major clause and tell you exactly where you stand before you exchange. Don’t put yourself or your transaction at risk!
Free contract reviewFrequently asked questions
The term “Exchange” describes the process of both parties signing and providing their signed Contract of Sale to the other party, with the intention of being legally bound. It is the point of no return — before exchange, nothing is committed; after exchange, both parties are.
In NSW, exchanging contracts is the point at which a property sale becomes legally binding on both the buyer and the vendor. Each party signs an identical copy of the Contract for Sale and Purchase of Land; those copies are swapped and dated. From that moment, both parties are committed to completing the transaction, subject to any applicable cooling-off rights.
Once contracts are exchanged, both parties are legally bound. A vendor who attempts to back out without legal grounds will be in breach of contract. The buyer can seek specific performance (a court order requiring completion) or alternatively claim damages. Importantly, only the buyer — not the vendor — has a statutory cooling-off right in NSW.
While not strictly required to exchange, you will need a PEXA-certified solicitor to complete settlement. A solicitor reviews the contract, negotiates amendments, advises on the cooling-off period and 66W implications, orders searches, and manages settlement. The cost of a mistake at exchange can far outweigh the cost of proper advice.
If you rescind during the 5 business-day cooling-off period, you forfeit 0.25% of the purchase price to the vendor. Any amount paid above that is refunded to you within 14 days. For example, on a $1.2 million property you forfeit $3,000. This applies automatically regardless of your reason for rescinding. You will also be responsible for your own legal expenses incurred.
Settlement typically occurs 6 weeks after exchange, though this is negotiable. Shorter periods of 2–4 weeks can be agreed where the vendor needs a fast completion or you are a cash buyer. Longer periods may suit buyers who need extra time to arrange finance. The settlement date is specified on the front page of the contract and becomes binding at exchange.
Unlike in Queensland or Victoria, finance conditions are not standard in NSW contracts and are rarely agreed to by vendors in competitive Sydney markets. This is precisely why unconditional finance approval before exchange is so important. Your solicitor can attempt to negotiate a finance clause as a special condition, but most vendors will refuse — particularly with competing buyers.
Transfer duty in NSW must be paid within 3 months of the contract date (or settlement, whichever is earlier). First home buyers may be eligible for full exemptions or discounts depending on property value. Your solicitor will assess your liability, advise on exemptions, and arrange payment through Revenue NSW.
PEXA (Property Exchange Australia) is the mandatory electronic platform through which all property settlements in NSW are completed. Your solicitor must be PEXA-certified. West Legal & Associates is PEXA-certified. The platform allows all parties — buyer’s solicitor, vendor’s solicitor, and lenders — to digitally confirm settlement figures, release funds, and register the transfer of title simultaneously and securely.
Exchange with confidence. Speak to us first.
Senior solicitors. PEXA-certified. Online and in-person across all of NSW.
This article is general information only and does not constitute legal advice. Property transactions involve significant financial and legal obligations specific to your circumstances. Contact West Legal & Associates for advice tailored to your situation before exchanging contracts.
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