The British Columbia provincial government has introduced a home buyer’s protection bill that will allow a 3-day “cooling off” period from the time they have an accepted offer.
Buyers have been pressured to buy properties without proper conditions, or “subject clauses”, due to heavy competition which is leaving them with costly problems and repairs after the deal has closed
The mandatory 3-day cooling off period will give home buyers the time to arrange financing, properly inspect the home, and back out of the agreement if they change their mind within 3 days of having their offer accepted. It also provides a cancellation fee of 0.25% of the accepted purchase price if the buyer exercises their right to back out. For example, if a homebuyer exercises the right to recession on a $1 Million dollar home the fee would equate to $2,500 paid directly to the home seller.
The 3 day cooling off period will come into effect January 2023
This legislation was originally announced at the peak of a red hot real estate market, right when real estate sales started to decline. Since March 2022, when this bill was first announced, sales have slowed considerably and we are not seeing the multiple offers that we were seeing in the years prior. Whether this cooling off period will be effective now, or if the government waited too long to react is yet to be determined.
In recent months we have headed more into a balanced market and buyers are now able to put conditions into their offers without having to worry about other competing offers. Sellers are now willing to accept offers with financing, home inspection, and many other conditions. As we’ve stated earlier this year, if the government is going to introduce this type of rule they should be cautious that if the market were to swing the other way it wouldn’t leave sellers at an unfair disadvantage.
Another consideration is whether 3 days is long enough to complete a home inspection or to get financing approved. Even with a solid pre-approval it is highly unlikely that a lender will provide approval in just 3 days. Currently we are seeing approvals take at least 5 business days. As for home inspections, finding a home inspector that can be available on less than 24 hours notice and providing a report then have the buyer read over the report and then do some extra due diligence based on what the report shows all within 3 days is a tall order.
The good news is that buyers will still be able to add regular financing and home inspection conditions with the normal 1-2 week periods so they are not rushed. The purpose of this 3-day cooling off period is to protect buyers in a competitive real estate market where they are not able to put necessary conditions. The question is, why enact this now (actually, January of next year) after the market has cooled and not two years ago when it was needed.