In British Columbia, the newly-implemented home buyer rescission period, a ‘cooling-off’ period that allows buyers the right to rescind an offer within three business days of an agreement being signed, has not proven to be useful, say a number of real estate experts.
“Few B.C. buyers are exercising their right to use the cooling-off period the way it was intended—to allow them an ‘out’ after a rash decision to purchase a property,” said Phil Soper, president and CEO of Royal LePage
“Unfortunately, we are seeing people blatantly abusing the program by making offers on multiple homes as they shop around, locking up scant housing inventory as if clothing in a retail store. The legislation is harmful, not helpful, and should be amended or scrapped.”
Soper said the concept has been used elsewhere in the country with new home construction, particularly with condominiums.
“Investors are locking up properties . . . and essentially continuing their shopping. To me, it feels like they’re using this legislation like laying away a pair of shoes or a shirt in a retail store because they don’t want anyone else to buy it, and they might come back and buy it later.”
– Phil Soper, president & CEO, Royal LePage
“The Government of B.C. decided to apply this to the resale market, and we’re concerned because we didn’t think it was addressing any real problem in the first place,” he said. “And now that it’s been in the market for some time, we’ve seen literally zero evidence that it’s being used for its intended purpose, which is for a consumer who wrote a deal on a property to change their mind.
“And worse, we’ve seen examples of it being used for nefarious purposes. Specifically, in the Lower Mainland, properties are very, very expensive, and there have been examples of investors locking up a property in a very tight market; Vancouver is the market that’s bounced back most aggressively in the country.
“So inventory is tight. Demand is high. Investors are locking up properties . . . and essentially continuing their shopping. To me, it feels like they’re using this legislation like laying away a pair of shoes or a shirt in a retail store because they don’t want anyone else to buy it, and they might come back and buy it later.”
In this case, unlike the condo market, they’re not buying from a big corporation; they’re not buying into a project that will be completed years from now. They’re buying from another consumer.
“So it’s not serving any public good, and it’s being used for an almost mischievous loophole, a low-cost loophole for unscrupulous investors.”
– Phil Soper, president & CEO, Royal LePage
“And in the spring market, which only lasts a few weeks, they may have another buyer who would be interested in a property, but because it has to be marked as sold, they move on and purchase something else, and it can really hurt homeowners. So it’s not serving any public good, and it’s being used for an almost mischievous loophole, a low-cost loophole for unscrupulous investors.”
Soper adds, “It appears to be, in the early stages, not the kind of technique that an organic end user is inclined to use but rather someone who is buying a home to, for example, flip it when they see a hot market evolving,” said Soper.
He said the B.C. government should amend the legislation to include substantial costs for the pain and anguish a homeowner has to go through when deals like this are unhooked, rescind the legislation altogether or look to other ways to improve housing supply which is really at the heart of affordability challenges in B.C. and the rest of the country.
“The intent was to give the opportunity for the buyer to have some space to breathe after they got the accepted offer to make sure that they made the right decision.”
– Trevor Koot, CEO, BCREA
Trevor Koot, CEO of the BC Real Estate Association, said the reason for the new regulation was quite simple from the government’s perspective.
“During a heated market, there was a tremendous amount of pressure on everybody involved in a real estate transaction—buyers, sellers, realtors, licensees, other stakeholders like inspectors and appraisers – and what the intent was . . . the (housing) minister was trying to give the gift of time. The intent was to give the opportunity for the buyer to have some space to breathe after they got the accepted offer to make sure that they made the right decision,” said Koot.
He said the impact on the industry is not known yet.
“Our team at BCREA is going to go out to the membership through survey later this spring and into the summer… and we’re going to be able to go back to the regulator and to the ministry of finance and say this is the impact, this is how it’s being used, and these are the areas we should keep our eye on collectively,” said Koot.
“It was a day late and a dollar short. The market had changed by the time the rescission period came in.”
– Elton Ash, EVP, Re/Max Canada
Elton Ash, executive vice-president, Re/Max Canada, said the impact of this new rule on the real estate market in the province is hard to judge right now.
“We’ve not heard anything directly about it affecting pricing or timing on sales, and it’s probably because the market changed. It was a day late and a dollar short. The market had changed by the time the rescission period came in, and we weren’t seeing the multiple offers; we weren’t seeing that kind of activity,” said Ash.
“Having said that, though, we are starting to see that again depending on the market and the price range. The real estate industry is working well with it. The disclosure forms are all there. There’s been a lot of education within the industry around the use of it. There isn’t a lot of lack of awareness of it. It’s just there. It’s been a non-event really outside the digital paperwork that’s required.”
Ash said the ‘cooling off’ period was brought in with good intentions given the nature of the market as it was a year ago with multiple offers. Buyers were feeling a sense of stress because they were making non-conditional offers.
“The jury’s out on it at this point in time,” he said.
The B.C. Financial Services Authority brought the new homebuyer protection period legislation in on Jan. 3, creating a mandatory three-business-day period to give homebuyers more time to secure financing or arrange home inspections.
The extra time is intended to help buyers fully consider whether a purchase is right for them under any market conditions, including rising interest rates and high-pressure sales.
Mario Toneguzzi is a contributing writer for REM. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer for several national publications and consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list.
I agree, The recession period not helping at all. the people who make a cash offer, they know what they are buying. The market goes up every year. We can not change the law because some wealthy greedy buyers just buy houses without considering the condition of the house or feel so smart to buy it any way. I think the lawyer of the real estate should interview some of the well known Realtors in the market to ask their option before make any new rules in the contract of purchase and sale. Having the experts who dealing with market on the daily bases is so vital to make a better change.
It can become very costly for any to tie up several properties , having to pay the rescission amount makes no sense.. My office has not seen any rescissions, just an annoyance because the Sellers are in limbo for anywhere to 3-5 days before they even get into the subject period. Sellers are also consumers and they have been neglected by this legislation, hastily put through because of an over zealous finance minister who did this because of a personal situation.
Perhaps a more reasonable option would be to only require a rescission period where the offer contains no subject clauses such as financing or inspections.
My goodness, what a surprise! The writing was clearly on the wall, before our politicians and bureaucrats touched this.
They are just like the brats in the toy-store who run amok, and won’t listen to anyone – until something is broken beyond repair. Leaving either mom and dad strapped, the employee fired, or the store-owner going home with no profit that day.
The sooner this new requirement is removed the happier every one will be It serves no purpose other than cause harm