In March 2022, the BC Government proposed an amendment to the Property Law Act allowing purchasers the right to recision, otherwise known as a “cooling off period”, in efforts to help protect buyers in the residential home buying process. To give context to the matter, at the time the province had been in an extended period of limited inventory, experiencing significant home price increases and had an excess number of buyers all vying for the same few homes. Many buyers were left frustrated after continually competing in multiple offer situations just to hear that yet again their offer was not accepted. Some purchasers, in order to make their offer more attractive, wrote subject free offers. A subject free offer means there are no conditions and upon the seller’s acceptance the purchase is firm. Buyers who make a subject free offer forgo the opportunity to ensure financing is secured, do a home inspection or perform any other due dilligence after the offer is accepted.
So, what exactly is the Homebuyer Protection Period? The HPP will allow purchasers to back out of a real estate transaction within three days for any reason. However, this comes at a cost. A rescission fee of 0.25% of the home’s purchase price will be paid to the seller by the buyer if they choose to rescind their offer during this period. On a million-dollar home that would be a $2,500 fee the buyer will then owe to the seller if they choose to rescind their offer during this period.
For those of you who have not bought or sold in a while or maybe you’re a first-time home buyer, it’s important to know that the majority of offers have conditions. Your REALTOR® will advise you accordingly when preparing your offer to ensure you are protected and include conditions unique to your situation. These conditions allow you the opportunity to perform your due diligence upon having an accepted offer so that you can move forward confidently and complete your purchase.
Skip to July 2022, BC’s real estate market is in a very different place. Inventory has risen, the Bank of Canada has introduced multiple hikes to the prime lending rate and the market has generally softened. We are no longer experiencing subject free offers and homes selling for significantly over asking price, in fact we are often seeing price reductions in attempt to attract one offer. The real estate market is cyclical and will continue to experience ups and downs throughout our lifetime.
This month, the BC Government announced that the Homebuyers Protection Period will take effect on January 1, 2023. After already experiencing a shift in the market, it leaves many to wonder why the government is continuing to focus on protection for buyers only. Shouldn’t all consumers including sellers be protected equally? The president of the Association of Interior REALTORS® states, “Ultimately, these regulations will be inconsequential and fail to improve consumer protection. Which is a real shame because consumers in the interior and across the province really deserve better.”
How does this affect you? As a buyer, you need to know that this does not come into effect until January 1, 2023. Many consumers have been confused about the early announcements and think this has already come into effect which is not the case. Secondly, there is a fee for using the recission card which comes in at 0.25% of the purchase price. Thirdly, this isn't a replacement for using a REALTOR® when making a purchase. In most scenarios, buyers do not pay the commission in BC. It's a no brainer when it comes to making one of life's largest purchases that you want a professional advocating for your best interest.
As a seller, you need to know how this recision period may affect any subsequent purchase you are making. Know that the purchaser may change their mind and collapse the contract for any reason during the recision period. Finally, make sure you have a professional advocating on your behalf.
Have questions about the Homebuyers Protection Period and how it affects you? Leave your questions in the comments!
