BC has introduced new “cooling off” periods for home sales that, despite their name, will do almost nothing to actually cool the red hot real estate market.
The changes will, however, make it slightly safer to buy a home, at a time of bidding wars, unconditional offers, and properties being purchased under such extraordinary pressure that buyers are forced to skip steps like home inspections, leaving them vulnerable to getting ripped off on a lemon of a home.
Finance Minister Selina Robinson said cooling off periods will allow a buyer a certain number of days after closing a deal to check their finances, conduct a home inspection, and pull out of the purchase without any financial or legal penalties.
BC already has a seven-day cooling off period in the purchase of pre-sales for new condos.
The number of days for the rest of the real estate purchases, and the exact details, will be studied by the BC Financial Services Authority, the regulator of realtors, mortgage brokers and credit unions, among other things, which is rapidly growing as the government repeatedly adds more items to its mandate.
“This is really a consumer protection intervention,” said Robinson.
“Having some sort of relief valve that gives them the opportunity to rethink their decision and to make a re-decision, to decide differently, is really about creating some space for people, when they're making what is likely the biggest financial decision of their lives. This is really about making sure that people are protected.”
BC’s real estate sector, which has enjoyed years of unimaginable growth and wealth, reacted predictably, saying the government interventions won’t accomplish anything useful.
“It’s not clear whether what has already been announced will improve homebuyer protection,” declared the BC Real Estate Association.
“Committing to this type of policy without the appropriate level of research and consultation first is presumptive at best.”
Luckily, the BC Financial Services Authority does have access to research and data. It will be able to fill in the blanks for the minister. The agency most recently did a deep dive into strata insurance, helping to detangle that complicated subject.
Robinson also tasked the agency to investigate at least two other real estate topics: the practicality of eliminating blind bidding on home purchases, and the impact of all the unconditional offers flooding the market.
Currently, BC buyers have no idea what other offers are on the table for the seller. In the hyper-competitive market, that leads to bidding wars and dramatic overbids as buyers attempt to win the property - in the process artificially overinflating the price of the sale and future similar listings.
Bank economists and even the country’s largest real estate company, RE/MAX, have encouraged governments to allow buyers to see the other offers and make more appropriate bids.
It seems like a no-brainer reform. As do cooling off periods.
The new government measures won’t slow pricing in the sector - to do that, government will need to crack down on slow municipal approvals of projects and help boost supply.
But it doesn’t mean the new reforms are bad. In fact, they are long overdue.
Rob Shaw has spent more than 13 years covering BC politics, now reporting for CHEK News and writing for The Orca. He is the co-author of the national best-selling book A Matter of Confidence, and a regular guest on CBC Radio.
- Rob Shaw last wrote that after taking 18 months to come up with a bold forestry plan, the province expects BC’s 204 First Nations to examine, consult, and respond in 30 days.
- The main real estate story in Metro Vancouver has been, and continues to be, all about supply - or lack thereof. Ryan Berlin looks at the month-over-month trends.
- In the absence of a new housing plan from Ottawa, Mark Goodman and Cynthia Jagger point out how landlords are left holding the bag.