By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929
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The Province of BC will allow homebuyers to withdraw their offer during the cooling off period without any legal consequences
The B.C. Government plans to take steps to cool the real estate market by establishing a “cooling off” period where homebuyers could withdraw their offer to purchase without any legal consequences. These new rules would apply to both resale homes and new construction.
According to B.C.’s Minister of Finance, home purchasers should be protected when making financial decisions that involve their lives. The government hopes this plan will eventually cool down the market while bringing additional measures and safeguards.
On August 1, 2021, the B.C. Financial Services Authority became the only regulator for all financial services in consultation with stakeholders and other industry experts. Their discussion pertains to how the blind bidding and pressure to purchase without conditions put people at risk of default.
Much like Toronto, Vancouver’s average house price currently sits at $1.2 Million, which is approximately 15% higher than it was last year, according to data compiled by MLS.
The government also expressed concern over pent-up demand, which happens when the ending of lockdowns and restrictions force a sudden surge in buying and selling activity, driving up the cost of real estate.
Further information about the new measures will be announced this month.
The main concern with Government intervention that seeks to nullify offers to purchase by implementing a cooling-off period regardless of whether the offer is firm (meaning no conditions), is that it may cause excessive volatility in the market and eventually lead to chaos among sellers and buyers. Although, in theory, it will protect buyers with a longer cooling-off period, it may allow purchasers to back out of legitimate contracts without any consequence, which is unfair to people selling their property.
Some claim the Government is taking their policies too far and that current contract law should be respected. If a purchaser is concerned about financing, for example, they can put a financing condition in place that protects them from losing their deposit or facing legal consequences if their financing doesn't come through. Of course, sellers don't have to accept an offer with conditions, which ends up limiting how many people can safely and successfully purchase property, and giving investors or others who are not concerned about financing an unfair advantage.
I will comment on the policy when the terms are made fully available.
Sarah Colucci is a seasoned mortgage professional working with Mortgage Edge, Canada's largest independent broker house.