Amid B.C.’s coldest housing market in years, where it now takes weeks for the average home to sell, the province has brought in a cooling-off period for home buyers.
The legislation, first in Canada’s resale housing market, came into effect January 3, 2023.
Housing sales in B.C. in 2022 were down 50 per cent compared to a year earlier, according to the BC Real Estate Association. As of December, it took an average of 31 days for a home to sell in Greater Vancouver, where December sales reached 1,303 transactions, down from 2,737 in the same month a year earlier, reports the Real Estate Board of Greater Vancouver.
December housing sales in the metro region posted the lowest level since 2018 and were 31 per cent below the 10-year average for the month.
Nevertheless, the new legislation is meant to protect buyers from being pressured into high-risk sales, according to the province.
“Too many people have been faced with giving up an inspection in order to buy a home,” said Selina Robinson, Minister of Finance. “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.”
The homebuyer protection period includes a rescission (cancellation) fee of 0.25 per cent of the purchase price, or $250 for every $100,000, for those who choose to back out of a deal. For example, if the purchaser exercises the right of rescission on a $1-million home, they would be required to pay $2,500 to the seller.
Buyers still may make offers conditional on home inspections or financing at any time. The protection period will offer homebuyers the opportunity for due diligence at times when such conditions are not in place.
The homebuyer protection period is informed by the results of consultations completed last year with a wide range of real estate industry stakeholders, including home inspectors, appraisers, realtors and academics, as well as representatives from the legal and financial services sectors, according to the province.
These consultations took place before and during the first six months of 2022 before a series of mortgage rate hikes flattened the market. In Greater Vancouver, for example, 18,879 sales were recorded in the first half of 2022 compared to just 10,348 in the second half of the year.
The cooling off period, which was first announced in July of 2022, covers three consecutive business days and it cannot be waived, even if both parties agree.
The legislation allows some exclusions, which include:
• Pre-sale contracts, such as on pre-completion condos, are not affected, as such transaction are already subject to a seven-day rescission period under section 21 of the Real Estate Development Marketing Act;
• residential real estate located on leased land (such as First Nation leaseholds);
• residential real estate sold at auction; and
• residential real estate sold under a court order or supervision of a court.