BC moves closer to ‘cooling-off’ periods in real estate deals

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B.C.’s financial regulator is recommending a new pre-offer period and a cooling-off period in an effort to calm the province’s housing market.

The B.C. Financial Services Authority — which oversees credit unions, mortgage brokers, and insurance brokers in addition to real estate — made the recommendations on Thursday, in addition to other changes.

The report calls for two major changes:

  1. A new five business day “pre-offer” period after a property is first listed for sale, during which offers are not allowed to be made or accepted
  2. A new three business day “cooling-off” period after the seller accepts an offer, where the buyer can back out of the deal by paying a penalty.

The pre-offer period was recommended by the province’s real estate sector as a way to end so-called “bully bids” where a buyer makes a quick offer on a newly-listed property but stipulates a very short deadline to pressure the seller into a deal before other bidders willing to pay more can participate.

The government should also make it mandatory during this period for sellers to provide upfront property disclosure statements and strata documents to anyone interested, according to the report.

Buyers can use the time to conduct home inspections, arrange financing and get their affairs in order before making an offer at the end of the five-day freeze.

The buyer could choose to back out for any reason – unhappiness at the home inspection, financing trouble, or legal advice – but they would have to pay a fee of as much as 0.5 per cent of the property value to the seller for wasting their time. On a $1 million home, the fee would amount to as much as $5,000; on a $750,000 home it would be as much as $3,750.

To help the new process, the report recommended government make it mandatory for sellers to allow access to their property at any point during the transaction for a home inspection (even if a home inspection is not a condition written into the offer) —  but it stopped short of saying home inspections be mandatory on every purchase.

Buyers should also have to disclose to the seller if they have any other active offers in play on other properties before a deal is struck, according to the recommendations.

If you have any questions or would like to know more details please contact kara at [email protected] or 604-341-9937.