New B.C. law allows home buyers to back out of sales

Buyers' second thoughts

What exactly is the Home Buyer Rescission Period (HBRP)?

For months now, we’ve been hearing about a proposed cooling off period for home purchases. This is it.

Qualifying what is to follow with the fact I am not a realtor and that is not my area of expertise, I want to share a few important pieces I’m learning and how they may affect you, as a buyer or a seller.

Please do your homework and confirm with your realtor what your rights are with respect to rescinding any offers you are considering collapsing.

On Jan. 3, legislation comes into effect in B.C. that will allow purchasers a brief window of time to back out of a purchase contract for residential real estate. This timeframe is up to three clear business days (business days do not include weekends or statutory holidays) after an offer is accepted.

Opting out doesn’t require a reason, but it does come at a price. Should you choose to exercise your right to rescind a contract, you must pay the seller 0.25% of the purchase price.

As an example, if you were to rescind a contract on a $750,000 home, you would be obligated to pay the seller $1,875.

If an offer is collapsed, the rescission fee is payable to the seller. If there is already a deposit held in trust with a lawyer or notary, the fee will be deducted and paid to the seller before the deposit is returned to the buyer.

Realtors must provide information to their clients about the HBRP by way of a specific form that needs to be included in their contracts.

There are several key points to note:

• The HBRP cannot be waived, even by mutual agreement.

• There are exemptions to this legislation, including, but not limited to:

• Sales by way of foreclosure

• Pre-build sales

• Sales on leasehold land

• Sales by auction or assignment

• The legislation also applies to private sales.

• There are specific steps that must be followed if you are choosing to rescind an offer.

More information can be found at the B.C. Financial Services Authority FAQ website's Home Buyer Rescission Period Frequently Asked Questions.

So what does this mean in practice?

It will be interesting to see how many times we see this provision in action. I feel a little like it is closing the barn door about a year too late, but hopefully this will discourage some of the panic buying we’ve seen over the last few years.

I do feel for realtors who will be working their way through this.

Most of the offers I see have the deposit being made by buyers once they have removed all their conditions and gone firm on their purchase. Will this mean that buyers will have to make deposits at the same time their offer is accepted? Will realtors have to chase down the funds payable to the seller if a buyer backs out?

Some of the offers have come across my desk in the last two years have concerned me, more so the knowledge some clients felt forced to write subject-free offers just to have their offers considered. I imagine this new legislation will change that market dynamic.

Again, I am not a realtor ,so if you are actively buying or selling please make sure you talk to your realtor to see how this legislation may affect you.

On to a new and exciting 2023. I hope you and yours stayed safe and warm. Happy New Year.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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