“The greater the difficulty, the more glory in surmounting it. Skillful pilots gain their reputation from storms and tempests.“– Epictetus
This article’s title is not an allusion to the catastrophic flooding from the Atmospheric River, a.k.a. “Pineapple Express”, however my thoughts go out to the emergency crews and residents affected by the unfortunate events that placed our province under a state of emergency. Our real estate industry too, is facing a difficult road ahead. The BC Financial Services Authority (BCFSA) intends to introduce a mandatory “cooling off” period for real estate services in 2022. The first Canadian jurisdiction to enact legislation for all residential real estate sales. They define it as follows:
“A cooling off period gives buyers time to undertake due diligence when making a property purchase and provides the right to withdraw from a purchase agreement within a specified period of time after an offer is accepted.“
At face value, it sounds no different than a typical subject removal period. During which, a buyer can perform a property inspection, appraisal, or any other contingency they deem necessary to close on the purchase. In a normal scenario, unless there is a valid reason for the sale not to complete (material latent defect, infestation, structural, etc.) the contract of purchase and sale remains binding. Otherwise, a purchaser may lose their deposit and face further repercussions.
With cooling off measures, a buyer can back out of a contract simply because they decide not to complete it, with minor penalties yet to be announced. There are so many issues that come to mind if these measures indeed move forward. As if supply is not already historically constrained, now buyers can place offers on multiple properties simultaneously, and back out with minimal consequence? It is intended to work in favor of buyers, but what then happens to supply? This will no doubt pour gasoline on the already scorching fire, and further erode the inventory of listings to choose from. More questions than answers. Presumptive at best. Unintented consequences likely.
Measures such as this aren’t necessarily new. The Real Estate Development Marketing Act (REDMA) provides a seven-day rescission period for sales of units in multi-unit development properties, like condominiums. BCFSA is looking at specific parameters for a cooling off period for newly built and resale home sales not captured by REDMA.
The practice of blind bidding is one of the main factors that has led to price distortion. Additional measures are being considered as to how to make multiple offers more transparent for the consumer. When combined with price baiting, which is when properties are listed with artificially low listing prices in order to garner interest and encourage multiple offers, well, we all know the result. That is a conversation to be left for another day.
Buyers need homes, yet are faced with an ever-growing challenge to find them. Conversely, there is understandably hesitation for sellers in putting their homes on the market, as the situation is then flipped on them. There are always opportunistic deals, especially when most are winding down for the year, and some sellers are eager to sell before the holidays. It just becomes a matter of whom you work with, and where you look. I wish I could flog the stereotypical REALTOR® rhetoric and say this is the best time to buy, but the writing is on the wall.
There is, however, no better time to sell. New developments are sold out before they even reach the public, bidding wars are taking place over nearly every listing, interest rates are forecasted to rise, there is a frenzy of buying activity, packed open houses, and double digit price growth occurring even in the most remote areas of the province.
In contrast to recent events—if you have a roof over your head, food in the fridge, and are surrounded by positive and optimistic people, you have mostly everything you need. The rest will come in due time, but may require rolling up your sleeves. I hope you are all well and safe.
Photo Credit: TJ Watt