The NDP government is making changes to how homes are bought and sold in British Columbia.
Early last November Selina Robinson, NDP Minister of Finance, announced she will introduce new legislation this spring changing how real estate is bought and sold in BC.
If passed the legislation will introduce a "cooling off period" for real estate sales in BC. The proposed legislation would apply to the sale of both new and existing properties.
According to the announcement, it will be similar to the cooling-off period already in effect for pre-construction condominium sales.
“People looking to buy a home need to know they are protected as they make one of the biggest financial decisions of their lives. Especially in periods of heightened activity in the housing market, it’s crucial that we have effective measures in place so that people have the peace of mind that they’ve made the right choices,” said Selina Robinson, Minister of Finance.
Announcement Causing confusion
How long will the cooling-off period be? That's just one of the questions being asked.
The proposed legislation is being compared to the existing seven-day cooling-off period for pre-construction sales of multi-unit development properties like condominiums or townhouses.
Those in the business of buying or selling real estate warn such a "cooling off period" will have a domino effect. Rippling through the entire buying and selling process.
Sellers often tie the sale and subsequent purchase of a new property on the condition of the sale of their current home.
For example, what if a buyer backs out of the deal? What happens to the seller if they were trying to purchase a new residence themselves using the equity from the sale of their home? What if alternative buyers have moved on? Could the cooling off period be abused? Might a buyer bid on 2 or 4 or 10 properties at once?
That's a lot of what ifs.
In other words a lot of uncertainty.
Caught by Surprise
The announcement caught many by surprise. Real estate brokers and real estate boards have been flooded with calls from clients asking for details on what this means.
British Columbia Real Estate Association (BCREA) Chief Executive Officer Darlene K. Hyde. is quoted as saying: "While we would have liked to answer these questions clearly and concisely, we simply can't because of the way this decision was made. There really are no answers yet and that's causing a lot of concern."
The BCREA research department found this proposed legislation may actually reduce homes on the market.
Fewer listings obviously mean higher prices.
There are unintended consequences
Liberal and NDP governments have both introduced measures intended to cool BCs hot real estate market over the last decade.
Experts are divided if the foreign national tax has had any significant effect. The empty home tax has filled some dwellings but the high cost of housing and shortages continue.
Other measures like those for first-time buyers will only increase demand.
Currently, Boomers are holding on to their homes. At the same time, 25-39-year-olds are looking to buy. That's already creating a huge demand for a small number of units.
The research concludes buyers rarely opt-out
A 2016 Australian study conducted by the Deakin Business School concluded cooling-off periods don’t work for consumers.
In fact, the lead researcher suggested rather than an opt-out clause an opt-in provision may offer more protection for the consumer.
For example, after a sales agreement has been signed, the agreement won't be "official" until the consumer "re-confirms" the contract 24 to 48 hours later.
If the buyer does not "opt-in" within the predetermined time frame the contract lapses.
According to the BCREA, the high cost of housing was one of the single most important issues on the minds of Canadians last federal election
The bottom line according to industry insiders, realtors, real estate professionals and the public needs to be consulted.
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