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Three-day grace period for home purchases

Gov't picks just one recommendation from report
real estate numbers in delta, bc
The B.C. government’s announcement of a three-day cooling off period for home purchases won’t affect most sales, says a local realtor.

The B.C. government’s announcement of a three-day cooling off period for home purchases won’t affect most sales, says a local realtor.

“I don’t think it will affect the market at all,” said South Delta realtor Dean Bauck. “The important thing is that everybody is understanding that there needs to be consumer protection."

Last week B.C. Finance Minister Selina Robinson said that starting Jan. 1, there will be a three-day waiting period, the homebuyer protection period, before a sale closes on a home. That will allow buyers in a hot market time to get a home inspection or financing.

During brisk markets, many offers are made without conditions, leading to purchases without home inspections.

Bauck though said most buyers will complete their purchases rather than back out of a deal even with the new waiting period.

The homebuyer protection period requires buyers to pay a cancellation fee of 0.25 per cent of the home price to the seller, if the buyer decides to bail out of the offer. For a million-dollar home purchase that works out to a $2,500 penalty.

The cooling off period is one of the recommendations in the B.C. Financial Services Authority’s “Enhancing Consumer Protection in BC’s Real Estate Market,” report published in May.

Buyers still can make offers subject to home inspections or financing.

“It’s not going to cool the market,” Bauck said. The market has already cooled, he added.

The new rule though could allow some buyers to take advantage by making offers on multiple homes, then bailing out of the less desirable ones if the preferred purchase comes through.
That could increase demand, says BCREA. Such a waiting period could raise home prices by two or three per cent, increase the number of frivolous offers and tie up homes with multiple offers, said the B.C. Real Estate Association’s white paper published in February.

The paper was part of the consultation that resulted in the B.C. Financial Services Association report used as a basis for the government policy. 

Bauck notes that if a buyer backed out of a deal, the seller would still get the 0.25 per cent penalty fee, but he or she still would have to start over selling the home.

“You’re imposing greater uncertainty on the seller,” he said.

Previously, if a buyer walked away from a written offer, without a reason or condition, that would be considered breach of contract, Bauck said.

During a hot market though, a three-day waiting period could help buyers, because under such conditions, some choose to make unconditional offers.

A three-day waiting period would allow time for inspections or financing.

Many sellers though encourage purchasers to do pre-offer home inspections, he added. That creates more certainty and possibly a higher price.

When it comes to condo purchases, buyers rely on strata depreciation reports for the complex, which they can read before making an offer, Bauck said.

With higher interest rates, the Metro Vancouver market has cooled, Bauck said. “You rarely see subject-free offers anymore.”

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