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The B.C. government is introducing a new three-day protection period that will allow prospective homebuyers to complete an inspection, secure financing or back out of a deal with a small fee.

Earlier this year, the provincial government directed the BC Financial Services Authority to look into the parameters for a potential cooling-off period for home sales. The BCFSA is a Crown corporation that regulates financial service providers, including mortgage brokers and real estate agents.

B.C.’s Ministry of Housing says it’s the first such policy that will apply to purchases of both resale and newly constructed homes in Canada. Ontario has a 10-day cooling-off period for the purchase of preconstruction condos.

The B.C. policy includes a 0.25-per-cent cancellation fee that a buyer or seller would have to pay if they break a deal during the protection period. The fee equates to $250 for every $100,000 of value charged to whichever party chooses to cancel the deal.

The policy will come into effect on Jan. 1, 2023.

“This is a major step toward providing homebuyers with the peace of mind they deserve while protecting the interests of people selling their homes – for today’s market and in the future,” Finance Minister Selina Robinson said in a news release.

She added that too many people are faced with giving up a home inspection in B.C.’s competitive market conditions. Many buyers have resorted in recent years to foregoing an inspection to make their bid more attractive. The ministry said people are still able to make offers that are conditional upon a home inspection, but that this policy will ensure that the inspection can still take place.

BCFSA chief executive officer Blair Morrison said the parameters it suggested “are designed to give British Columbians appropriate time to exercise due diligence,” and were made after consultation with stakeholders in the industry.

“We want to promote confidence in real estate transactions and our advice is aligned with that outcome,” she said.

In its May report, the BCFSA also advised the government to explore other changes to how property is bought and sold, such as considering requiring sellers to disclose the number and prices of offers received during a bidding war, and to establish a five-day preoffer period in which a seller cannot accept a bid.

Tsur Somerville, an associate professor at the University of British Columbia, noted that the province’s choice of only a three-day period ensures that sellers aren’t too negatively affected.

He said a longer cooling-off period could give buyers the opportunity to game the system by making multiple offers for different properties and leveraging accepted deals to a seller to get a better price.

“Any time you give benefits to the buyers, you’re essentially taking them away from the seller,” Prof. Somerville said.

“The government is trying to thread the needle on this between providing more reassurance to buyers and getting rid of the stress particularly first-time buyers feel, without necessarily exposing sellers to undue risk as well.”

Prof. Somerville said that while this policy may not be as important in the current climate of rising interest rates cooling the housing market, it’s important that the policy was put in place to have an effect when the market does eventually pick up steam again.

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