As of the very start of 2023, home sales across British Columbia will be subject to a three-day, cooling-off period as a measure to protect homebuyers.
The provincial government first announced it will add a mandatory cooling-off period to its tool to help address housing affordability, but the precise details and timeline for the policy were up in the air until today.
When it goes into effect on January 1, there will be cancellation fee of 0.25% of the purchase price — $250 for every $100,000 in value — for those who choose to back out of a deal. This means that, for example, if a homebuyer exercises the right to “rescission” on a $1 million home, they would be required to pay $2,500 to the homeowner.
Such a policy is the first of its kind in Canada to offer better consumer protection in the real estate market. This gives prospective homebuyers more time to perform due diligence, such as securing financing or arranging home inspections.
“Too many people have been faced with giving up an inspection in order to buy a home,” said Selina Robinson, minister of finance. “This is a major step toward providing homebuyers with the peace of mind they deserve while protecting the interests of people selling their homes — for today’s market and in the future.”
Upon implementation, the provincial government will study the policy and its potential effects. This cooling-off period was established after widespread consultation with 140 industry stakeholders and experts.
“Buying and selling a home are the most significant financial transactions in most people’s lives,” said Blair Morrison, the CEO of BC Financial Services Authority.
“We want to promote confidence in real estate transactions and our advice is aligned with that outcome.”
However, the BC Real Estate Association has been skeptical over the provincial government’s claims that this will be an effective policy. For example, the cooling-off period could encourage wealthy buyers and investors to submit offers on multiple parties, thereby increasing demand and a potential bidding war. In Spring 2021, there were nearly three times the number of homebuyers in the market than there were available properties, which led to highly competitive market conditions.