New 3-Day Contract Waiting Period for B.C. Homebuyers

From industry experts to public policymakers to buyers and sellers, the Canadian real estate market learned a lot about the housing industry during the coronavirus pandemic. But what were some of these revelations? For example, during the buying frenzy, many prospective homebuyers abandoned the idea of home inspections or decided to place a bid for a home first without securing the necessary financing. All this was done to purchase a residential property at rock-bottom interest rates. But was this the right move, especially now that mortgage rates are about double where they were more than a year ago? Provincial real estate regulators certainly think that the 3-day contract waiting period for B.C. homebuyers may help, especially during a sizzling period in the provincial real estate market.

So, what did the province do anyway?

New 3-Day Contract Waiting Period for B.C. Homebuyers

British Columbia became the first province to impose a three-day cooling-off period for buyers after they have signed an agreement to purchase the residential property.

The period to cancel a contract without penalty begins on the day the contract is signed and is completed at midnight on the third day after the contract signing. In addition, the homebuyer protection span includes a rescission or cancellation fee of 0.25 per cent of the purchase price.

Officials say that this measure’s purpose was to give buyers more time to think about the purchase and if it is the right choice for them, especially in a high-rate climate.

“Housing remains a top concern for people in B.C. and a top priority for this government,” said Katrine Conroy, Minister of Finance, in the announcement. “Buying a home is one of the biggest decisions of people’s lives. This is an important milestone as we lead the way in protecting people and strengthening public confidence in the real estate market.”

While sellers might not have the dozens of buyers conceding basic protections of the home-buying process, leaders argue that this protection will be crucial during the next frenzy.

“Lack of time for buyers to complete due diligence can exacerbate risk or be used to hide property defects that otherwise may have been discovered,” said Leo Spalteholz, a Victoria-based housing analyst, in a statement. “Though the market has cooled dramatically in recent months, it’s good to proactively put buyer protections in place. The rescission period strikes a sensible balance between protecting buyers while the fee should protect sellers from frivolous invocation of it.”

Indeed, according to the British Columbia Real Estate Association (BCREA), sales activity declined nearly 47 per cent year-over-year in February, totalling fewer than 4,800 units. So, it is obvious that conditions in the British Columbia housing market are entirely different from a year ago.

“While activity across provincial housing markets remains well below normal,” said BCREA Chief Economist Brendon Ogmundson. “There are encouraging signs that the market is balancing out. Home sales rose month-over-month in most markets, and prices appear to be firming up in the face of low supply.”

That said, the provincial government confirmed that it would continue to analyze and consider possible side effects of this and other housing-related measures. But officials are confident because similar cooling-off policies have been found in Australia and France.

Avoiding Chaos

The pandemic-era housing bubble was unlike anything the Canadian real estate market had ever seen before. Every type of property across the country, from detached homes in Toronto to cottages in rural communities, was selling for record-high prices. Because demand was so enormous, with bids coming in fast and furious, many homebuyers ditched standard practices to complete a transaction as quickly as possible out of fear of losing out on this unit.

Out of nowhere, families that had no experience with owning a home, whether it be shingles or ice damming, were forced to become experts overnight.

In some cases, it was not even the buyers that removed this standard clause in contracts but rather the sellers, according to BNN Bloomberg.

Ultimately, because this is the largest purchase you will ever make, every real estate expert and industry professional agrees that pre-inspections are critical, even if they come out of your own pocket. So, in the end, locate an expert, find a home inspector with a background in construction, and assess the house.

That said, even if the Canadian housing sector continues to slow in the post-pandemic market, will other regions throughout the country adopt similar measures? If some forecasts are true and the nation is bracing for another cycle of enormous growth in the next few years, it might be out of necessity that provinces or municipalities embrace these protections.