The BC Government recently announced its intent to introduce legislation in Spring 2022 that will mandate a cooling off period for buyers of all residential real estate.
A cooling off period gives buyers the right to withdraw from a purchase agreement within a specified time period after an offer has been accepted. Until now, BC’s residential real estate had been functioning without a cooling off period where if a buyer wishes to terminate a contract for any reasons other than those set out in the terms and conditions, they would have to negotiate with the seller and typically face significant financial penalties or legal ramifications. So far the BC government has only mentioned the cooling off period to apply to buyers, and there has been no mention of it applying to sellers as well.
BCs pre-sale sector has already implemented this cooling off period with new developments. Buyers of pre-sale units have a seven day recession period from the time they receive a copy of a signed purchase contract or acknowledge receiving a disclosure statement where they are allowed to withdraw their offer with no penalties.
However, research suggests that a cooling off period is unlikely to have significant impact on consumer’s decisions. Purchasing real estate is a big decision and most consumers do their due diligence before putting in an offer.
While the governments goal with the cooling off period to increase transparency, there could be a potential impact on the BC housing affordability crisis. If implemented, it would open up the opportunity for more buyers to bid on more properties, potentially increasing housing prices. With BC`s extremely low supply conditions, this could increase prices by an addition 2-3% according to research conducted by BCREA.
Currently, the BC Financial Services Authority (BCFSA) is consulting stakeholders on the appropriate length of a cooling off period and whether or not to include penalties for exercising the right to recession. The Ministry of Finance has also requested consultation on several consumer protection policies such as, blind bidding, price baiting, risks associated with subject free offers, home inspections, financing and more.
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