The possibility of new Homebuyer Protection Periods across the province will give potential buyers more assurance in making an offer on a home – but requires balancing and more detail, said experts.
A Homebuyers Protection Period, also referred to as a “right of recission” or “cooling-off period,” would allow a period of time for a home buyer to retract their offer for a relatively small fee. Details of the fee and time period are being decided and may vary throughout the province, according to B.C.’s Finance Minister.
The periods were made possible following an amendment to the Property Law Act on Monday (March 28). If implemented, B.C. will be the first province to do so for newly built and resale homes.
Its purpose is to allow homebuyers to confirm a line of credit or conduct a home inspection after placing an offer on a home, without losing their offer or feeling buyer’s remorse if neither goes as planned, according to the release. Tsur Somerville, professor of real estate at UBC’s Sauder School of Business, said such periods would have a noticeable impact on the “very, very intense” housing market of the Lower Mainland.
Presently, “people will have an open house on Wednesday or Thursday, and on Saturday or Sunday, they’re taking bids.” Without measures for consumer protection allowed by a cooling-off period, “you will get people who are essentially (bidding) to gamble,” he said. Industry representatives estimated 70 per cent ofoffers in B.C. are made without confirmed financing or a home inspection, the Ministry said. Sommerville said some will pay for an inspector to attend several open houses.
“(A Homebuyers Protection Period) is a symptom of a particular market, rather than a necessary feature of a housing market,” he said.
A cooling-off period is nonetheless only supported by 35 per cent of provincial homebuyers, according to a survey of 1,157 British Columbians released by the British Columbia Real Estate Association on March 29.
“A cooling-off period will likely increase competition for any given property, has the potential to increase prices and does not clearly take risks to sellers into account,” BCREA CEO Darlene Hyde said in a statement.
Somerville said if the recission fee is too permissive for certain buyers, it allows one to make offers on several homes, forcing a seller to lower their price to remain competitive, he said. In February, the Real Estate Association had instead recommended B.C. introduce a mandatory pre-offer period; five days following a property’s listing where offers cannot be made, allowing those interested time to meet their sale conditions.
Details on the recission fee and time period are necessary to assess the measure’s success in B.C.’s housing market. “It’s reasonable to assume both buyers and sellers need protection,” Sommerville said.
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