A new three-day cooling off period for homebuyers to allow time for inspections and related due diligence after an accepted offer is coming into effect in January.
The program includes a fee of 0.25 per cent for every $100,000 in value for those who back out of a residential sales agreement, Finance Minister Selina Robinson announced Thursday. For example, buyers who change their minds on a $1-million property would pay $2,500 to the seller.
The program, which applies to both resale and new homes, will be the first in Canada, she said.
Cooling-off periods for pre-construction sales of multi-unit projects are already in place in B.C.
The new measures are aimed at taking the pressure off buyers when a hot housing market results in fierce competition and bidding wars that have led to purchasers making offers without any conditions, such as home inspections or arranging financing.
“Too many people have been faced with giving up an inspection in order to buy a home,” Robinson said.
Allowing for a cooling-off period will give buyers peace of mind by providing a “bit of time that they need to make a sound financial decision that will impact them for years to come.”
Robinson indicated the new measures are just a start.
“We will be considering more measures to further strengthen public confidence in the real estate market in the days and weeks ahead.”
The decision to impose new rules was partly informed by a report to Robinson from the B.C. Financial Services Authority, a Crown agency regulating the real estate sector.
Andy Yan, urban planner and director of the city program at Simon Fraser University, called the homeowner protection period “something that is a long [time] coming and much needed as a modernization package for how homes are purchased in B.C. and for the stability, accountability and transparency of the entire market.”
But Trevor Koot, president of the B.C. Real Estate Association, said the organization is disappointed by the province’s decision to bring in the cooling off period in isolation, rather than as part of a suite of measures, as recommended by the Financial Services Authority. “The decision undermines the independence and expertise of the province’s real estate regulator and should be concerning to British Columbians.”
The authority had recommended a pre-offer period, setting out a minimum time of five business days on the market, in combination with a cooling-off period. It also suggested that sellers of resale strata units provide key documents to prospective buyers at the time of listing.
Koot urged the province to hand the ability to make decisions regulating real estate over to the Financial Services Authority. “Failing that, there will be no real positive change in B.C.’s housing sector and consumers will continually be left behind.”
Victoria Real Estate Board president Karen Dinnie-Smyth said it’s difficult to predict how the three-day pause will affect the housing market since it’s so new, and “the pace of the market may be very different from the pace of the market that these new rules were created to react to.”
She expects the cooling-off period will likely cause some disruptions early on, but will quickly become normal practice.
“We appreciate that the government has its attention focused on the housing market and the challenges that buyers and sellers face in heated conditions. Protecting consumers is important, and part of the very heart of what realtors do.”
To read the report to the province, called Enhancing Consumer Protection in B.C.’s Real Estate Market, go to: bcfsa.ca/media/2861/download.