British Columbia will introduce cooling-off period for homebuyers

While all the economic headlines focus on rising interest rates and slower sales, one change may have slipped away from the mass media – British Columbia’s provincial government plans to introduce a cooling-off period for homebuyers.

In April, British Columbia passed Bill 12, amending the Property Law Act and allowing buyers to back out of a deal during a certain period of time.

The province’s Financial Services Authority provided some details on this. It recommends a three business days cooling-off period, while also saying that buyers should not be allowed to waive the period for backing out. The exceptions are court-ordered sales or auctions.

Home sellers should be allowed reasonable access for a home inspection during that period. Meanwhile, buyers should pay a “modest” termination fee of 0.1-0.5% of the property price in case they decide to back out of the purchase.

The reaction to this change is quite mixed. Provincial finance minister Selina Robinson believes it will protect consumers. According to her, up to 80% of offers in British Columbia were made without conditions, and it’s a huge risk for buyers.

At the same time, others don’t think the measure will help in solving BC buyers’ main problem – sharply growing real estate prices, which keep going up even amid an activity slowdown.

In April, the MLS home price index for all residential properties in Metro Vancouver rose by 18.9% annually and exceeded $1.37, the Real Estate Board of Greater Vancouver says.

Meanwhile, home sales fell by 34% in the region over the same period, and, according to the British Columbia Real Estate Association, the trend is seen across the entire province.

The new measure may be quite helpful to buyers, particularly for new ones. Many of them are afraid to enter the market, as they don’t want to make a subject-free offer in a desperate attempt to compete with those making higher bids or providing large down payments.

Moreover, it may give buyers the possibility to do due diligence, securing financing, requesting all the necessary documents, conducting appraisals and inspections.

However, sellers might face buyers who will make an offer and then just leave without any consequences, so sellers will have to start it all from the very beginning.

The implementation of a new cooling-off measure is expected this summer, right when the market is slowing down.

Interest rates in Canada have been going up this year, and the central bank is expected to keep raising its key lending rate.

Such conditions have given many potential buyers time to think before entering the real estate market, but we can still see strong activity in case of certain housing types.