British Columbia’s new cooling-off period when buying real estate is a welcome change for many home buyers in the province, but like anything else, it does come with some strings attached.
It’s no secret that the real estate market in BC has been hot for quite some time, with many people feeling pressure to make quick decisions when it comes to purchasing a home. The new cooling off period now gives buyers a 3-day cooling off period after they’ve signed an agreement to purchase a home.
Effectively, the BC cooling-off period is intended to give homebuyers a little bit of breathing room to really think about their purchase and make sure it’s the right decision for them. Should they decide, they can back out of the deal without losing their deposit or face being legally required to close on the property and fulfil the obligations of the purchase contract.
British Columbia is now the first Canadian province to require a three-day cooling-off period as part of a government initiative designed to give purchasers more time to arrange financing or home inspections after a deal has been accepted. While waiving home inspections and financing conditions has become more prevalent in the recently hot market, those dynamics have changed over the past few months as interest rates and market conditions have cooled buyer demand for housing across Canada.
Nonetheless, the provincial government of British Columbia has decided to be the first to move forward with the cooling off period, also known as the “Rescission Period” and “Homebuyer Protection Period”.
At which point does the cooling-off period begin?
The rescission or cooling off period will begin the next full business day after an offer is accepted. For example, if a seller accepts your offer on Monday afternoon, your cooling-off period would end on 11:59 p.m. on Thursday and therefore becomes a firm and binding agreement.
How will the cooling-off period impact other conditions and/or subjects already in the purchase contract?
If your offer contains conditions such as financing, home inspection, etc., these conditions will run simultaneously with the cooling-off period. The cooling-off period does not begin after condition removal.
Is there a fee if a buyer exercises the right to rescind during the cooling-off period?
Buyers who within the 3-day cooling period decide to rescind, or not move forward with their transaction will have to pay a fee of 0.25% of the purchase price to the seller. On a $1M property, a fee of $2,500 will be owed by the buyer to the seller.
This fee is going to be deducted from the buyer’s deposit (usually through the Real Estate Brokerage, if using a Real Estate agent), if any. If there’s no deposit, the buyer will pay the seller the fee directly.
Are there types of properties that are exempt from the cooling-off period?
The following types of properties are excluded from the legislation and the rescission, or cooling off period, does not apply:
- Residential real property that is located on leased land;
- A leasehold interest in residential real property;
- Residential real property that is sold at auction; and
- Residential real property that is sold under a court order or the supervision of a court.
- A pre-sale (pre-construction) property, or an assignment sale
The bottom line
British Columbia is the first province to introduce a cooling-off period for buyers of residential properties. Buyers will be allowed a 3-day period after the acceptance of an offer to rescind or walk away from the agreement. However, if a buyer chooses to exercise rescinding the offer during the 3-day cooling-off period, they will still owe the seller a fee equal to 0.25% of the property’s selling price.
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