Homebuyers in B.C. now have better protection in the real estate market as the homebuyer protection period takes effect on Tuesday, Jan. 3, 2023.
Creating a mandatory three-business-day period to give homebuyers more time to secure financing or arrange home inspections is the first key action the Province is taking following the B.C. Financial Services Authority’s (BCFSA) report on improving consumer protection in the real estate market. The extra time will help buyers fully consider whether a purchase is right for them under any market conditions, including in the face of rising interest rates and any high-pressure sales.
“Housing remains a top concern for people in B.C. and a top priority for this government,” said Katrine Conroy, Minister of Finance. “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.”
The homebuyer protection period, also referred to in the industry as the homebuyer recission period, includes a rescission or cancellation fee of 0.25% of the purchase price, or $250 for every $100,000, for those who cancel their contract to help ensure that all parties are taking the transaction seriously. For example, if the buyer exercises the right of rescission on a $1-million home, they would be required to pay $2,500 to the seller.
Leo Spalteholz, a Victoria-based housing analyst, notes the negative effects when the balance of power tilts too far toward sellers. He sees the new rules as a way to protect buyers in high-pressure sales or future overheated markets.
“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,” Spalteholz said. “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.”
As the Province’s financial services regulator, BCFSA has been educating real estate agents and other real estate licensees about their accountabilities around the homebuyer protection period since the legislative changes were announced in July 2022.
“Consumer protection is core to what BCFSA does,” said Blair Morrison, CEO of BCFSA and superintendent of real estate. “We’ve worked extensively with real estate licensees to get them ready for the introduction of this new protection in B.C. in 2023. We urge consumers with questions about the [homebuyer protection period] to speak directly to their real estate licensee.”
The Province is continuing to analyze the advice and consider potential effects of other measures recommended in BCFSA’s report. People can expect to see more BCFSA advice reflected in any next steps toward improving consumer protection in the months ahead.
BCFSA is responsible for the supervision and regulation of the financial service sector, including real estate professionals, mortgage brokers, insurance, pensions, trusts, credit unions and the Credit Union Deposit Insurance Corporation.
Quick Facts:
- B.C. will be the first province to implement a homebuyer protection period for resale property and newly constructed homes.
- Similar provisions exist in some international jurisdictions, such as Australia and France.
- Legally known as the homebuyer rescission period, the protection period applies to all residential real estate sales, including private sales, with limited exceptions.
- Cooling-off periods for pre-construction sales of multi-unit development properties, such as condominiums, are in place under the Real Estate Development and Marketing Act.
Photo: (flickr.com)
