The province introduced amendments to the Property Law Act on Monday with the aim of bringing in a cooling-off period this spring to protect home buyers, although there is no hint as to how long it will be.
Finance Minister Selina Robinson is making good on a promise made last fall to establish what the government is calling a “home-buyer protection period.”
In theory, buyers would have a limited amount of time to consider their offers, ensure financing, obtain a home inspection or cancel a purchase.
It’s an attempt to address concerns that would-be buyers are feeling pressured into submitting offers for homes without basic conditions in order to buy in a hyper-competitive market.
“Too often, buyers are feeling forced to submit no-condition offers just to have a chance in a multiple-bid situation,” Robinson said. “People need to have protection as they make one of the biggest financial decisions of their lives. A home buyer protection period is about improving consumer protection and balancing the risk in the marketplace.”
Robinson said the current situation — where the speed of transactions puts buyers in a position where they can’t properly evaluate the property — is only working for people who profit from an overheated market.
That may have been a shot at the associations representing real estate agents, who were noticeably absent from Robinson’s announcement Monday, while home inspectors and mortgage-industry professionals were represented.
Both regional real estate bodies and the B.C. Real Estate Association have been critical of the government’s plan to introduce a cooling-off period, saying it ties up properties and only protects buyers.
“There is some disappointment because we were talking about consumer protection when we submitted our recommendations based on feedback from our membership,” said Victoria Real Estate Board president Karen Dinnie-Smith. “What we were taking into account was consumer protections for both buyer and seller.”
Instead of a cooling-off period, the VREB has been pushing for a mandatory listing period, which would allow potential buyers time to do their due diligence, line up financing and get a home inspection done, without tying up the property.
Dinnie-Smith noted that Robinson alluded to a financial penalty for would-be buyers to bow out of a transaction, which suggests the finance minister has heard some of the concerns raised by the industry. “But the devil will be in the details,” she said.
The province has not said how long the cooling-off period will be, or what the financial costs of retracting an offer would be.
Sonia Furstenau, leader of the B.C. Greens, said on the surface, the measure looks like it should be positive. “I have been increasingly worried by the trend of prospective homebuyers waiving their rights to obtain an inspection or financing in order to have a competitive offer,” she said.
But Furstenau said she is concerned that the changes are being implemented through regulation, which means the government is “once again bypassing the essential democratic oversight of the legislative assembly.”
Furstenau also noted the cooling-off period won’t solve the housing crisis, which requires investment in non-market housing, such as non-profit and co-op developments.
Details of how the the cooling-off period will work are expected to come after Robinson reviews a report from the B.C. Financial Services Authority, which has been consulting with real estate industry stakeholders, including home inspectors, appraisers, real estate agents, academics and representatives from the legal and financial services sectors.
That report is due in a matter of weeks, and Robinson told reporters she hoped to have the regulations and legislation in place later this spring.
Helene Barton, executive director of the Home Inspectors Association of B.C., said her group is fully behind the province on the cooling-off period, which she calls essential for consumer protection.
“We all know real estate is buyer-beware, but is that fair when consumers are not allowed to practise due diligence due to heated market conditions?” she said.
Industry representatives estimate that over the last year, more than 70 per cent of offers in B.C.’s most competitive markets like Victoria have been made without conditions.
B.C. would be the first province to implement a home-buyer protection period for resale properties and newly constructed homes.
Seven-day cooling-off periods for pre-construction sales of multi-unit development properties such as condominiums are already in place under the Real Estate Development and Marketing Act.