Beginning next year, all home sales in British Columbia will undergo a three-day cooling period, giving buyers time to arrange inspections, secure financing, or rescind offers.
The new policy, which comes into effect January 1, 2023, is the first of its kind in Canada and is intended to protect buyers in BC's high-stakes real estate market. Finance Minister Selina Robinson announced the policy on Thursday, noting that unconditional offers, which became the norm during the pandemic real estate boom, have the potential to leave homebuyers with thousands of dollars in unexpected repairs.
“Too many people have been faced with giving up an inspection in order to buy a home,” Robinson said. “This is a major step toward providing homebuyers with the peace of mind they deserve while protecting the interests of people selling their homes -- for today’s market and in the future.”
During the cooling period, BC homebuyers will be able to rescind offers, but if they do so, they will be faced with a cancellation fee of 0.25% of the purchase price. If a buyer were to back out of a $1 million sale, for example, they would have to pay a fee of $2,500.
The policy was recommended in a BC Financial Services Authority (BCFSA) report "based on consultations with over 140 stakeholders, including industry experts and public-interest organizations," according to BCFSA CEO Blair Morrison. But not everyone in the industry was happy about it. Back in May when the report was released, the British Columbia Real Estate Association (BCREA) cautioned that a cooling period could “cause additional strain and confusion for buyers, sellers, and others involved.”
One of the biggest issues the BCREA raised was the fact that BCFSA was only asked to consider how, not if, a cooling period should be implemented. Indeed, in its report the BCFSA says that it consulted “key stakeholders and experts on the parameters of a cooling-off period,” but does note that it “did not consult on the merits of a cooling-off period.” The report also states that “participants from groups who were closest to the real estate transaction -- such as real estate industry associations and members of the real estate legal community -- were not supportive of implementing a cooling-off period.” Meanwhile, those who were less directly involved were more supportive or neutral.
Those who were against a cooling-off period in BC noted several possible drawbacks such as potential harm to a seller’s interest if they have to re-list in a cooler market, further price escalation as a result of reduced consequences for placing an offer, and a domino effect on other transactions that are part of a buying and selling chain.
Following Thursday's announcement, the BCREA reaffirmed their dislike of the policy, stating in a release that they anticipate the cooling period "will not be an effective measure, especially as market conditions are changing and becoming more balanced."