QUICK HITS
- B.C. has implemented a mandatory three-day cooling-off period for homebuyers to allow additional time for due diligence on their purchase.
- The homebuyer rescission period includes a cancellation fee of 0.25% of the purchase price.
- Concerns have been raised about whether buyers might use the period to tie up more than one property and about the impact on sellers.
British Columbia is now the first province to introduce a mandatory three-day cooling-off period for buyers after they’ve signed an agreement to buy a home.
B.C.’s government says the homebuyer protection period, also known as the homebuyer rescission period, was implemented on Jan. 3 to allow homebuyers additional time to do due diligence on their purchase.
The cooling-off period was first announced in November 2021 when the market was overheated, and unconditional offers were rampant. In a balanced, and in some cases, buyer’s market, many say it’s fixing a phantom problem.
A changing market
“It’s too little, too late,” says Keith Roy, team leader with Re/Max Realty Select in Vancouver.
“We are no longer in a period of subject-free, multiple offers, and we are unlikely to be for a number of years. We’re at the other end of the cycle.” Roy adds, “So this will really become relevant in three to five years when the market changes direction.”
Trevor Koot, CEO of the British Columbia Real Estate Association (BCREA), agrees it’s unlikely to see any rescissions in the current market.
He confirms the association was initially consulted when the policy was announced, and it provided 34 recommendations around public protection.
Koot says BCREA’s main recommendation was a mandatory five-day pre-offer listing period to prevent bully offers and give buyers and sellers time to make their decisions.
“All of it was ignored,” he states, “(The government) ignored all of the feedback and recommendations that came forward from the industry as well as the regulator.”
One-sided policy
He says another of BCREA’s concerns is that the policy is unbalanced and creates an unfair playing field between buyer and seller.
“I don’t think three days is enough time to do due diligence. I don’t think it’s fair to the seller,” says Koot.
“Very often (the seller) is a buyer in their own right on another property. It affects their ability to make any decisions on their next move because the buyer holds all the cards.”
The protection period includes a cancellation fee of 0.25 per cent of the purchase price, or $250 for every $100,000, for those who cancel their contract in an effort to dissuade bad actors.
‘Get out of jail free’ card?
Concerns have been raised about whether buyers would leverage the rescission period as an opportunity to tie up more than one property and only follow through on one.
“I think there may be an opportunity for that, but I think that, anecdotally, is probably being overblown. I don’t see that logistically playing out. I think realtors are there to protect both sides of transactions,” says Koot.
Roy calls the rescission a “‘get out of jail free’ card” and expects it to become apparent when the market eventually heats up again.
He envisions a “highly probable” scenario where a buyer and their realtor may put in two offers on two homes at once.
“(Buyers) are going to offer a crazy amount on both, and they’re going to walk away from whichever one they want to if they end up getting both. There’s now no risk to playing fast and loose.”
Roy adds while it may be unethical, it’s perfectly legal under the new rules, “Your risk before used to be that you were contractually obligating yourself to two homes.”
Additional explanation required
Another consideration for the industry is the paperwork.
BCREA says dozens of standard and legal forms needed updating, as well as education courses. The industry’s regulator has been educating real estate agents and licensees since the legislative changes were announced over the summer.
“This doesn’t add new paperwork immediately, but it does add new parts that require explanation on the existing paperwork,” Roy says.
He adds that from an industry standpoint, these changes reinforce the importance of being a full-time realtor.
“I think that is more important than ever,” Roy affirms.
Jordana is the editor of Real Estate Magazine. You can reach her by email.
Cooling pff periods have nothing to do with the reality. BC has allowed developers, builders, realtors, appraisers to operate unethically for many decades. Smart buyers always check where their money goes the furthest – – just across the border into the USA are where the great deals are like buy 10, 20, 30 times as many houses and condos for the same price. So obviously people are not going to allow themselves to get hosed when they see the great deals across the USA instead.
We will miss you
Interesting. This is a case where the new regulation protects the buyer from themselves. I don’t know any buyer that has spent less then several months or years preparing to buy a home. Needing an extra 3 days to do their due diligence is over reach onto the seller and putting them in a very uneasy situation. Unless both parties have equal opportunity to cancel the sale which would make for a real circus of events, I don’t see how this can be considered fair play. Like all regulations they will need 10 more regulations to fix this one.
“The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’” – Ronald Reagan
Who does the fee go to? Broker? Seller?
The .25% goes to the Seller, directly out of any deposit held.
If there is no deposit, it is up to the Seller to collect from the potential Buyer and that would likely have to be through the courts.
It will be interesting to see just how swamped the CRT gets although I don’t see the chance of much of this happening until/if we get into a crazy market again.
Doesn’t make a lot of sense to any Realtor/Broker in BC that I’ve spoken to.
I was under the impression that the .25% was not coming from the deposit, you have to increase “the deposit” by that amount. Also…I’ve been advised that you should increase it more than .25% of the INITIAL offer price. If negotiated, the purchase price could be higher and the seller may not get .25% of the settled on purchase price if they back out. Also that if you haven’t gotten an additional deposit for the .25%, you risk not being able to get it from the buyer once they walk.
As I stated Jenna, “out of any deposit held” Check section 2, page 2 of the new CPS where it explicitly addresses the issue.
ie: $1M deal, $100k deposit and they invoke the rescission within the 3 days, the Brokerage pays the Seller $2,500 directly from the deposit and returns the balance as per normal practice.
As for any “increase” that will be between your Buyer and Seller when negotiating the contract and the amount payable is covered at Section 1, page 1 of the new CPS ‘once you reach final agreement to the price and terms’.
Good question Joe… who?