Financial Services Authority Report Recommended Major Changes to Buying and Selling Process across B.C
The BC Financial Services Authority, otherwise known as the BCFSA, is a government agency established in 2019 to serve as an independent regulator of the real estate sector.
It has recommended a three-day cooling-off period for prospective buyers in a real estate transaction process to protect them from the consequences of the rushed decisions required in one of the hottest real estate markets that the nation has ever seen.
The financial regulator considers its three-day cooling-off period recommendation to be a common-sense approach to good consumer protection.
Homebuyer Protection Period
A news conference released to the Canadian Press posted on their website advocates for the province of BC’s real estate sector adoption of a so-called “cooling-off” period, colloquially known as a homebuyer protection period, of three business days immediately following an accepted purchase agreement may help to protect buyers and address housing affordability.
In the report released by the B.C. Financial Services Authority, also counsels that the province obligates sellers and real estate industry stakeholders to provide buyers with reasonable access to a property inspection in a period that starts immediately after an offer has been accepted.
Additionally, the BCFSA’s report advises that key strata documents should be made available in the process to provide property disclosure forms when a strata property (which is a group of individual owners that are part of a whole) is listed.
The province could also require buyers to disclose to sellers any other active offers they’ve made, it suggests.
More recommendations added to home inspections and to provide reasonable access requirements, cooling-off periods.
Coupled with the homebuyer protection new cooling-off period, and to promote more market fairness in the real estate transaction process, the report also recommends ending blind bidding, home inspection accessibility and exploring open bidding alternatives used in many Scandinavian countries.
Do Sellers have a Cooling-off Period?
The cooling-off period called the Homebuyer Protection Period, which is different from the pre-offer period, starts after the seller and the buyer sign the agreement.
The clock on the Buyer Protection Period runs for Buyers and Sellers alike, but some find that the property legislation stacks the deck too much in favour of home buyers.
However, included in the bundled recommendations by the independent regulator is a modest termination fee of 0.1 to 0.5 percent of the price of a home to be paid by buyers who pull out of a deal.
What Do the Critics Say About the Cooling Off Period?
The Bill was introduced with little fanfare. Some real estate industry titans, including the BC Real Estate Association (BCREA), have concerns about the Real Estate Development Marketing Act.
Critical feedback, the Canadian Press news conference notes that the quietly introduced property legislation does nothing to address the disparity between the listing price and the purchase price, which can often be hundreds of thousands of dollars.
One major criticism is that nobody — not even the government folks that wrote the law — is exactly sure how it will work in practice.
This has sparked Finance Minister Selina Robinson to task an independent financial agency on how a cooling-off period would work, and in which cities it should apply. But she also wanted to pass the bill in short order so the province could be in a position to act before the busy 2022 summer real estate season. Some people say the legislation was rushed leaving a lot of unanswered questions.
When will it start? How many days will the cooling-off period be? Will you have to pay a financial penalty if you back out of a deal to buy a home? If so, how much? Will it apply in every community in the province or just in Metro Vancouver and Greater Victoria?
Critics within BC’s real estate sector condemn the act citing that proper stakeholder engagement would clarify why the cooling-off period is a bad idea. The one thing all parties can agree on in the debate on the bill is that a cooling-off period will do nothing to address rising real estate prices.
Real estate professionals counsel that it would be better to implement a five-day “presale” period, in which a new listing goes online but no offers are allowed.
Prospective Buyers could use the five days to line up inspections and financing, while sellers could avoid the uncertainty of being locked up in a cooling-off period with just one buyer whose deal may or may not come to fruition.
Finance Minister Selina Robinson has rejected the idea.
In conclusion,
While all parties agree that there are some pretty large blemishes in the Canadian real estate industry, proper stakeholder engagement may help to clarify where the root cause of the imperfections lay. More importantly, though, we need to fully examine how best to remedy those warts in order to take the industry from what can feel like an arms race and usher it into a fair market system that makes affordability more than political rhetoric.
