Home › Exchange of Contracts NSW

Exchange of Contracts NSW: What Happens, the Deposit, and Cooling-Off

Last updated: July 2026 | General information only, not legal advice.

Exchange of contracts is the single most important moment in an NSW property sale. Before exchange, either party can walk away. After exchange, both buyer and vendor are legally bound. Understanding exactly what happens at exchange -- and what you need to arrange beforehand -- can be the difference between a smooth transaction and a costly problem.

What is exchange of contracts?

In NSW, a property sale contract is prepared in two identical copies: one for the buyer and one for the vendor (seller). Each party signs their copy. When the signed copies are physically swapped -- "exchanged" -- the sale becomes legally binding on both parties.

Exchange is arranged by the buyer's conveyancer and the vendor's conveyancer (or by real estate agents in a private treaty sale). It can happen in person (the conveyancers swap documents at the same table), by post, or via electronic exchange using an approved platform.

Once exchange occurs:

• Both parties are bound by the terms of the contract
• The buyer pays (or has already paid) the deposit
• A 5-business-day cooling-off period begins for the buyer (see below)
• A settlement date is locked in (agreed in the contract, typically 4 to 6 weeks after exchange)

The deposit at exchange

In NSW, the standard deposit is 10% of the purchase price, paid at or just before exchange. This is held in trust (usually by the real estate agent or vendor's conveyancer) until settlement.

A lower deposit of 5% is common and negotiable -- some vendors will accept 5% at exchange with the remaining 5% due at settlement. Your conveyancer can negotiate this on your behalf when reviewing the contract.

If the purchase completes at settlement, the deposit is applied toward the purchase price. If the buyer pulls out before the cooling-off period expires, they forfeit 0.25% of the purchase price. If the buyer defaults after the cooling-off period has ended, the vendor can typically retain the full deposit and pursue additional damages.

The cooling-off period

Under the Conveyancing Act 1919 (NSW), residential property buyers have a 5-business-day cooling-off period after exchange. The period begins on the day of exchange and ends at 5pm on the fifth business day.

During the cooling-off period, you can withdraw from the contract. To do so, you give written notice to the vendor (or their agent) before 5pm on the last day. You will then forfeit 0.25% of the purchase price -- on a $1 million property, that is $2,500.

When the cooling-off period does NOT apply

• Auction sales: properties sold at auction have no cooling-off period. Exchange at auction is unconditional from the moment the hammer falls.
• Section 66W certificate: if you sign a section 66W certificate before or at exchange, you waive the cooling-off period entirely. This is common when buying at auction or when you need to compete strongly. See our section 66W certificate guide.
• Same-day exchange and settlement: rare, but when exchange and settlement happen simultaneously, there is no practical cooling-off window.

Off-the-plan cooling-off period

For off-the-plan purchases, the cooling-off period is 10 business days (rather than 5). See our off-the-plan conveyancing guide for more detail on off-the-plan protections.

The NSW Contract for Sale 2026 edition -- what changed

From 1 June 2026, all NSW residential property sale contracts must use the NSW Contract for Sale and Purchase of Land 2026 edition. This form is produced jointly by the Law Society of NSW and the Real Estate Institute of NSW.

If a vendor uses the 2022 edition for a contract entered into or exchange after 31 May 2026, the buyer has grounds to withdraw from the sale. When purchasing after June 2026, verify with your conveyancer that the current 2026 form is being used.

Key changes in the 2026 edition:

• New prescribed cooling-off notice form -- a specific form must now accompany the contract to notify buyers of their cooling-off rights.
• Anti-money laundering compliance warnings -- updated to reflect AUSTRAC obligations for conveyancers and solicitors.
• Foreign resident capital gains withholding -- updated to reflect the 2025 increase to a 15% withholding rate for non-resident vendors (for properties over the threshold). Source: Australian Taxation Office.
• Conditional contract clarifications -- updated following a Supreme Court ruling clarifying the operation of conditional (subject-to-finance) clauses.
• Electronic signing updates -- reflecting the now-common use of electronic signatures on NSW contracts.
• Property inclusions update -- "TV antenna" has been replaced with "internet/TV receiver" and solar power batteries have been added as a standard inclusion item requiring disclosure.

What to do before exchange

Most buyers feel pressure to exchange quickly, especially in a competitive market. But exchange is binding -- so get these steps done first:

1. Have a conveyancer review the contract. Never exchange on a contract your conveyancer has not reviewed. Your conveyancer checks for unusual conditions, encumbrances on the title, zoning restrictions, and risks specific to the property. See our guide to choosing a conveyancer.
2. Arrange a building and pest inspection. These can be completed in 1 to 2 business days. If the report reveals problems, you can negotiate before exchange or decide not to proceed. After exchange (and after cooling-off expires), you own whatever defects are in the building.
3. Confirm finance. You should have formal finance approval (not just pre-approval) before going unconditional. If you exchange subject to finance, confirm the exact terms of that condition with your conveyancer.
4. Check the s10.7 certificate and disclosure documents. Your conveyancer will review the vendor's mandatory disclosure documents, including the section 10.7 planning certificate, title search, drainage diagram, and any encumbrances on the property.
5. Arrange deposit funds. Have the deposit ready to transfer. Some buyers use a deposit bond if they need time to access equity from another property -- but confirm the vendor accepts one first.

What happens after exchange

After exchange, the conveyancing process moves to settlement. Key steps in this period include:

• Your conveyancer requests a title search and any outstanding rates certificates
• You finalise your home loan (formal approval and loan documents)
• Your conveyancer prepares the transfer document
• Both sides' conveyancers reconcile adjustments (council rates, water, strata levies) as at the settlement date
• Settlement occurs via PEXA (an electronic settlement platform used in NSW) -- see our settlement day guide

The typical settlement period in NSW is 4 to 6 weeks after exchange, but this is negotiable and some contracts have longer periods (for example, off-the-plan purchases may have settlement 12 to 24 months after exchange).

Buyer vs vendor: what each party does at exchange

Step	Buyer	Vendor (Seller)
Before exchange	Review contract, arrange building/pest inspection, confirm finance	Prepare contract and disclosure documents (s10.7, title search, drainage diagram), via conveyancer
At exchange	Sign contract, pay deposit (usually 10%)	Sign contract, receive deposit into trust
Cooling-off period	5 business days to withdraw (forfeit 0.25%); or waived if s66W signed	Cannot pull out during buyer's cooling-off period
After cooling-off	Finalise home loan documents, prepare balance funds for settlement	Discharge existing mortgage, arrange to vacate by settlement date
Settlement	Balance purchase price transferred via PEXA; receive title	Receives sale proceeds; title transfers to buyer

Common questions

What happens at exchange of contracts in NSW?

Both parties sign identical copies of the sale contract and exchange them. Once exchanged, the agreement is legally binding. The buyer pays the deposit (usually 10%) and a 5-business-day cooling-off period begins. Settlement then proceeds on the date agreed in the contract, typically 4 to 6 weeks later.

What deposit do I pay at exchange in NSW?

The standard deposit is 10% of the purchase price, payable at exchange. A lower deposit of 5% is negotiable with the vendor. The deposit is held in trust until settlement. If the buyer defaults after the cooling-off period expires, the vendor can retain the deposit.

What is the cooling-off period after exchange in NSW?

Five business days under the Conveyancing Act 1919 (NSW). The period ends at 5pm on the fifth business day after exchange. If you withdraw, you forfeit 0.25% of the purchase price. No cooling-off period applies at auction or if you have signed a section 66W certificate. Off-the-plan purchases have a 10-business-day cooling-off period.

What is the NSW Contract for Sale 2026 edition?

The NSW Contract for Sale and Purchase of Land 2026 edition is the current standard form for NSW residential property sales, mandatory from 1 June 2026. It includes a new prescribed cooling-off notice form, updated anti-money laundering warnings, updated foreign resident capital gains withholding provisions (15% rate from 2025), and clarifications on conditional contracts and electronic signing. Using the outdated 2022 edition after 31 May 2026 gives buyers grounds to withdraw from the sale.

Can exchange of contracts happen on the same day as settlement in NSW?

In theory yes, but it is rare in residential transactions. Same-day exchange and settlement removes any practical cooling-off period. Most NSW residential sales exchange 4 to 6 weeks before settlement.

What does unconditional exchange mean in NSW?

Unconditional exchange means contracts are exchanged and either the cooling-off period has expired without the buyer withdrawing, or the cooling-off period was waived by a section 66W certificate. After unconditional exchange, both parties are fully committed. A buyer who defaults risks losing their deposit and facing further legal action. A vendor who fails to complete can be sued for specific performance or damages.

Related guides

• Conveyancing process NSW: step by step from contract to settlement
• Cooling-off period NSW: how it works and when it does not apply
• Section 66W certificate NSW: waiving the cooling-off period explained
• Settlement day NSW: what happens when you complete a property purchase
• Contract of sale NSW: what it contains and what to check
• How long does conveyancing take in NSW?
• Complete guide to buying a house in NSW
• Caveat on property NSW: protecting your purchase after exchange
• The Victorian conveyancing process -- no separate exchange step

Sources: Conveyancing Act 1919 (NSW); NSW Government -- Contracts and deposits; NSW Contract for Sale and Purchase of Land 2026 (Law Society NSW / REINSW, mandatory from 1 June 2026). General information only, not legal advice. Last reviewed June 2026.