British Columbia has introduced a cooling-off period in order to protect home buyers, but some are not keen on the decision to do so.
On Monday, March 28th, the province’s Ministry of Finance announced that amendments had been introduced for the Property Law Act to enable the creation of a new Homebuyer Protection Period, which is meant to “protect people buying a home in a challenging real estate market.”
The Homebuyer Protection Period — otherwise known as a “right of rescission” — would respond to the pressure of placing purchase offers on a home without basic conditions in a competitive marketplace. Under the new amendments, a time period would be granted to give buyers more time to consider their offers and complete conditions for financing and inspection. Seventy per cent of offers made in B.C’s most competitive markets over the last year have been without conditions, according to the province.
B.C. would be the first province in Canada to implement a homebuyer protection period for both resale properties and new construction homes. Seven-day cooling-off periods for multi-unit pre-construction units are already in place under the Real Estate Development and Marketing Act.
Regulations would be introduced this year to determine the specific time period homebuyers will have to exercise the right of rescission, which will vary by region. The parameters of the legislation will be informed based on consultation by the BC Financial Services Authority (BCFSA) with real estate industry stakeholders. BCFSA’s consultation analysis is expected this spring, and protection measures are anticipated to be in place by the summer.
“People need to have protection as they make one of the biggest financial decisions of their lives,” said B.C Finance Minister Selina Robinson, in a press release.
“In our overheated housing market, we have seen buyers feeling pressure to waive conditions just to be considered, and new homeowners discovering costly problems only after a deal has closed. We want to make sure people buying a home have time to get the information they need to make a sound decision within limits that still give sellers the certainty they need to close sales,” she added.
Some don’t see cooling-off period as the solution
In response to Minister Robinson’s announcement, Darlene K. Hyde, CEO of the B.C. Real Estate Association (BCREA), pointed out that while governmental language has changed, the Homebuyer Protection Period is essentially the cooling-off period that has been discussed recently.
Hyde acknowledged that realtors share the concerns of the government over consumer risks in heated markets, but stated that a cooling-off period could have “unintended consequences.” This could include encouraging buyers to make offers on properties that they’re not serious about, fueling prices and competition.
BCREA stated that it supports the province’s intent to introduce a Homebuyer Protection Period, but pointed out that the cooling-off period “fails to meet the needs of British Columbians.” In a survey with 1,157 B.C. residents, BCREA said 35 per cent of respondents supported the introduction of a cooling-off period, and 71 per cent stated that realtors should be consulted when developing and implementing policies that impact real estate markets.
In his monthly market report for February, broker and chief economist at Dexter Realty, Kevin Skipworth, said that a cooling-off period may result in fewer listings and delays within the market.
“The effect would be chaos, with a cascading effect. A seller would not know for a week or so whether the sale was actually going through. If it didn’t, the next buyer would also have a mandatory grace period, and so on,” he said.
In February, BCREA published a white paper and a number of recommendations for the B.C. government on the housing market, which included alternatives to the cooling-off period, such as a five-day pre-offer period.
“Policy should equally protect all parties involved in real estate transactions while also contributing to a smooth functioning market and improved housing affordability. But the Province’s plan to amend the Property Law Act to create a cooling-off period in real estate transactions leaves BC consumers with more questions than answers,” said Hyde.
