I don't want my answers to appear smart, but am just curious about why you would cancel an offer, unless you have changed your mind. I have only ever heard of people cancelling offers when they have signed a contract, and the vendor has not signed it. Perhaps the vendor is waiting for a better one. In the meantime, purchaser decides they don't want the house after all, and rather than risking the vendor signing the contract and completing the contract, they ask in writing that it be cancelled or withdrawn. In that scenario, you need to cancel it in writing in case the vendor decides to sign it and you then are locked in.
The initial purchaser for my mum's house that has just gone unconditional today (yeay!!) did just this. Flew up from NSW, made an offer, mum countersigned higher. There is no way this contract could have come together until the purchaser coungersigned (or initialled) the counteroffer, but she called the agent from the airport to ask that her offer be withdrawn.
In this case, it was (I imagine) a notice to the agent not to bother following up to see if she wanted to initial the countersignature and make a contract, and allowed the agent to forget her and continue to market it.
Having never bought in NSW I don't know the pros and cons of verbally agreeing to a price, when that can be gazumped. I like the certainty of knowing that once two signatures are on the contract, only the purchaser can pull out on any clauses. The vendor cannot agree to a price, and then change his/her mind and accept a higher offer.
Our agent has a daughter who has just moved to NSW from Queensland and it is driving her crazy, the way the system works down there
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Added: I think what I am really wondering about is that I understand that in NSW the vendor could be phoned with "Mrs X wants to offer $500K cash unconditional". Vendor says "that is great, bring around a contract". In the meantime, they could be offered $501K and decide to take that offer instead. Is this correct?
In Queensland that original $500K offer is signed by the purchaser before the vendor even knows about it (generally) and presented straight away and instead of a verbal "yes" the vendor signs the contract. They can then not accept a higher offer.