B.C. real estate industry announced plans to implement a “cooling-off period”
Taming the housing market: Real estate industry at odds with B.C. government
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The Vancouver Sun
B.C. Real Estate Association is pushing back against province’s plan to allow homebuyers to back out of a sale within a “cooling period” of seven days.
The B.C. real estate industry and provincial Finance Minister Selina Robinson are at odds over how to tame the blistering housing market. Photo by Mike Bell /PNG
The B.C. real estate industry and provincial Finance Minister Selina Robinson are at odds over how to tame the blistering housing market.
Last November, the province announced plans to implement a “cooling off period,” where a buyer has seven days to change their mind and back out of a sale after agreeing to buy a property.
On Monday, the B.C. Real Estate Association, which represents 24,000 real estate agents, pushed back against the plan.
“A ‘cooling off period’ is not the answer to alleviating the stresses consumers are currently facing in real estate transactions,” said BCREA CEO Darlene Hyde, citing analysis the group conducted of similar cooling off periods in other global jurisdictions. “While attractive at first blush, in a market characterized by low supply, such as ours, we believe that a cooling-off period will cause more problems than it solves.”
Instead, the association proposes a “pre-offer period,” where buyers would get five days to research and get information about a property once it’s listed, but before any offers are accepted.
In the case of buying a strata property, it proposes ensuring that documents such as strata bylaws, depreciation reports, information on contingency reserve funds and copies of insurance paperwork are available when listings are posted.
It’s all part of a 57-page white paper with 30 recommendations that the industry has for addressing current hot housing market conditions, which it described as being “untenable” with its bidding wars, supply scarcity and soaring prices.
The association said the B.C. government’s announcement in fall 2021 that it would implement a “cooling-off period” was done without broad consultation.
Hyde estimates the province is 25,000 listings short of what is needed for a balanced market and said the lack of supply may be further exacerbated by the 70,000 to 80,000 immigrants B.C. expects this year.
On Monday, Robinson responded by saying the real estate association, as a commission driven industry, has a vested interest in the market being hot, but the government’s work is to make sure people are protected.
“I’m aware of many points of view on this, including the association’s suggestion of a pre-offer period. Pre-offer periods are unlikely to address concerns about the risk to buyers, can encourage multiple offer situations and have an unknown effect on housing prices.”
Larry Anderson, president of the Fraser Valley Real Estate Board, pointed out that the record housing market is due to a combination of other factors, including rock-bottom interest rates, major shifts in lifestyle and work habits due to COVID-19 and a very low inventory.
Alex Goseltine, executive officer of the B.C. Northern Real Estate Board, cautioned against “one-size-fits-all” answers and said the “cooling off period” answer appeared to be based on current market conditions only in specific parts of the province.
One academic argued that instead of calming the market, the so-called flexibility provided by the proposed “cooling off period” could make the market even more prone to speculation.
Andrey Pavlov, who studies real estate finance at Simon Fraser University’s Beedie School of Business, likened it to being able to buy an airline ticket or book a hotel, knowing there is no penalty for walking away from the purchase for a few days when those bookings will be much more expensive.
He said a cooling off period as proposed by the government would allow buyers to purchase a home as a speculative financial asset, fix the price and then actually decide whether to buy it for real or not a few days later without needing to pay a percentage for that flexibility. He said the situation would favour experienced buyers with deep pockets who would find incentives in making lots of transactions in a way that first-time homebuyers couldn’t do as easily.
“We have all also heard the views of mortgage brokers, home inspectors and the experiences of prospective homebuyers about taking unfair risks to find a home in a heated market,” said Robinson. “Right now, the province’s real estate regulator is consulting about ways to bring in a cooling period that could be effective in B.C.”
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