On April 25, 2022, just as the BC real estate market was starting to tip over, the provincial government decided to establish a new homebuyer rescission regime that focused on this cooling-off period, which allows buyers to have more time to consider their offer after they make it, giving buyers 3 more mandatory days to, make sure they can get adequate financing, do home inspections, things like that.
Then on July 21, 2022, the Government announced the Home Buyer Rescission Period Regulation, which sets out further details regarding the cooling-off period, and now this cooling-off period or rescission period is set to come into effect on January 3, 2023.
Now, why is this happening? At the time, there were concerns that homebuyers, in order to compete and win a multiple offers, we're having to write unconditional offers with no conditions, meaning no subject to finance, no home inspection, no anything. One article states that Industry representatives believe that more than 70% of the offers in B.C.’s most competitive markets in 2021 were made without conditions. We haven’t experienced that in our market, not that high, although admittedly there were more unconditional offers written in the years of the height of the boom than I have ever seen before.
This Rescission Regulation gives buyers a statutory right to rescind their offer to purchase residential property within three clear business days after the offer has been accepted by the seller. A clear business day means a day that isn’t a Saturday, a Sunday or a holiday. This cooling-off period applies to all contracts for purchasing residential real property, not only to those made without conditions but all of them.
Your first question may be, and this was my first question, what prohibits buyers from running around, making 10 offers and then backing out of all but the best value, and in the meantime holding up 9 other sellers from selling their homes during that 3-day period? Well, there’s a cost. The Rescission Regulation requires that a rescinding buyer pay an amount equal to 0.25% of the purchase price to the seller for canceling the offer during the cooling-off period. For example, on a $1 million property, the penalty would be $2,500. That would be paid from the deposit to the seller, and any remaining deposit to be returned to the buyer.
A homebuyer cannot waive its statutory rescission right.
This of course means more paperwork when you put in an offer to purchase a house. The mandatory paperwork that you will be signing will include the following notices:
• That the HBRP cannot be waived,
• The rescission period time length,
• The dollar amount of the rescission fee,
• The deposit handling, and
• exemptions (leased land, auction sales, assignments, pre-construction sales as there is already a 7-day rescission period on those, court-ordered sales)
Some frequently asked questions are:
What if there is no deposit?
Great question, often in our market the deposit is due upon final subject removal date. Let’s say you’re a seller and you accept an offer with no deposit upon acceptance, or often many deposits are due say 3 business days after the offer is accepted – which is the same time frame as the rescission period – and then the buyer bails? Rescinds and there's no money? Well, the money is due however how do you get it? You guessed it, you have to sue and go to small claims court. Fun.
Follow up Question: Does a Buyer need to provide a deposit?
No. Deposits are negotiable as to how much when they are tendered and if they are even given with an offer. Problematic in this situation? You bet, but having no deposit is always a terrible idea anyways, however, that is a topic for another video.
How does the seller get notified of the buyer rescinding?
The notice has to be given by registered mail, you could go back to the 90’s and fax them, or by email with a read receipt. I imagine all this will be done through the Realtors as Realtors are able to accept notices and service notices on behalf of their clients.
If I’m a Seller, can I rescind?
Nope, buyers only. Sorry Sellers.
Does a buyer need a reason to rescind?
No, not required.
Can the buyer and seller agree to waive the right of rescission?
No, it is legislated. It cannot be waived.
Can a buyer and seller contractually agree to a lower Rescission fee than the .25%?
No, the regulation is .25% and there’s no changing it.
Does this HBRPR apply to commercial properties?
No, only residential.
What if my offer is a backup offer?
Same deal applies, 3 true business days after the offer was accepted. Period.
Does this apply to manufactured homes?
Yes to those on their own land, no to those on pads.
So there it is everyone! That is all I know. Like, literally, all I know. This blog was made on December 10, 2022, and anything could change, we haven’t even seen the forms that need to be signed yet. However, at this time, this is the way it is from here on in if you want to buy a house, and if you want to sell a house, there are these 3 days of limbo for both parties. To cool off a market that has already cooled. Anyhow, welcome to real estate sales in the Province of British Columbia.
If you’re new to home buying and you’re educating yourself on the subject, you should watch our next video on deposits versus down payments, it’s called: Deposit vs. Down Payment When Buying a House in Vernon BC.