Just yesterday, the BC government passed sweeping regulations on the real estate industry, or better yet, how a home can be purchased in BC by introducing something called a three day cooling off period. If you're not familiar with the idea of a three day cooling off period, essentially, if a home buyer was to purchase a home and not put conditions on that offer, they've got a three day right of rescission to completely walk away from the property purchase. For whatever reason. This was implemented by the BC government with recommendations from the British Columbia Financial Services Authority, which regulates real estate in our province.
Today’s post is all about the most recent announcement, how this is going to affect home buyers and home sellers, and what holes might be in their current plan that hopefully they figure out before it's implemented. If you're interested in learning all about that, today's video is definitely for you. So let's jump into it. What's good, everybody? It's Darin Germyn from the Germyn Group, where we know you've only got one chance to either buy or sell your next home. So we're here to help you get it right.
So this was actually passed into Law a few weeks ago with relatively a blank slate because the provincial government is the majority of NDP. They were able to pass this into Law without really any details and that was done again a few weeks back. But as of yesterday, they've just announced what their intentions are to kind of fill in the blanks on what was passed. And it's a three day right of rescission intended to protect home buyers when the market is very hot and they make offers without conditions, so they have ample time to maybe send the deal to the bank or do a home inspection to better protect themselves. This is by law, so you can't forego this. As a seller, a buyer cannot opt out of doing this. And it's important to note that a buyer still can have conditions. Based on what they're saying, a buyer still obviously can have conditions on their offer, which if they are for a few days or exceed the three day period, that's no different than really what it is. This is more so for unconditional offers, saying if you put in on this contract tonight, your property is sold.
This means there's really no such thing as a condition free offer anymore because essentially you have a three day guaranteed right of rescission. Regardless of what the reason is, you might choose not to remove your conditions. And this does exist already. This exists in the purchasing of new construction property in BC, specifically for multifamily homes like Condominiums and Townhomes, where it's actually a seven day rate of decision. They've also proposed a cancelation fee, which was a very good idea. And whether the amount is good, I mean that can certainly be debatable but it was 0.25% of the purchase price and this is intended to make sure that there's less frivolous offers out there to make a little bit more of an incentive for people, not just to blanket offer out on multiple properties. To put this into perspective a little bit, if you were buying a home worth $600,000 as a home buyer and you decided to back out there would be a penalty of $1,500 due to the seller. For a $1 million purchase it would be $2,500 due to the seller. Basically, regardless of what the purchase price might be, it would roughly be about $250 for every $100,000 of the purchase price.
So what do we think about this new announcement? How is the industry going to react? How is it going to affect home buyers and home sellers? Well, it's kind of an interesting story. When the British Columbia Financial Services Authority went out and started soliciting background information from all different sorts of industry players they got mixed results and you're not going to necessarily hear about those mixed results because that's not necessarily what was published. Even if you dive into the report that they produced to present to the provincial government or you jump on the provincial government's website with the announcement from yesterday, you're going to see a lot of the quotes of people that are supporting this move are benefactors to the changes. This would be like example home buyers, home inspectors who are going to heavily benefit from this. You've got quotes from the odd industry kind of that maybe orbits around real estate somehow. But interestingly enough there is no quotes of support from really anyone from the real estate industry or anybody that might represent a home seller or a home seller themselves. Those are completely omitted from the quotes. Interestingly enough, only 35% of British Columbians that have been surveyed on this idea of a cooling off period actually really thought it was a good idea.
This was an independent survey done of just about 1200 people and kind of explained the pros and cons of what it might be and it wasn't largely supported. You probably would not be surprised to know that 93% of the real estate industry doesn't think that a cooling off period will make an impact in terms of really either slowing down the market or favoring impact for home prices in this province. But the bigger story here is well there's a lot to this story obviously, but how does this really affect either being a home buyer or a home seller? When you introduce something to an industry, the unique thing about being a home buyer or home sellers, they're competing interest. You can't have something given to one party without taking away from another somehow and that's exactly what this announcement has done. So here's a couple of ways that this really does impact a home seller. Firstly, you're really going to lose your impact. To have a quick sale, you are guaranteed to have to wait for at least three days. As of January 1, 2023, which is when this will be implemented, you're going to have to wait for at least three days.
So you lose the impact. You have a relatively quick sale. It's three days, but it still does impact you. But another thing that is on top of that is it also might change your strategy as a home seller. Your strategy now may be to list the home at a very sharp price to attract attention right away. Unlike what most home sellers do is they list it too high and then reduced down to a value that eventually gets it sold. This doesn't benefit you because you don't get to enjoy that fast sale. And your strategy can be impacted by this because the buyer, any buyer, can really now walk away. One of the problems with this as well is you start to lose your leverage on other home buyers as a home seller. Selling a home is all about getting the most amount of money for your home and doing it in the easiest and quickest way possible, or that's what the majority of homeowners want. When you accept an offer as a home seller and your property is guaranteed to be tied up for at least three days, that means that's three days where other home buyers, especially when you're a new listing on the market, other home buyers might choose to omit looking at your property.
They might choose to go buy another property because your home is under contract with somebody else. And especially in a marketplace like we are transitioning into and we're actually currently in where buyers have more leverage than sellers. This is really problematic for a seller who needs to get their home sold. Now. Don't think that this doesn't impact home buyers as well. It's not all roses for home buyers. If you're a seasoned home buyer out there and you've maybe bought multiple homes, or your level of comfortability with buying a home is quite high. Things like being a cash buyer now aren't necessarily as beneficial as they once were after January 1 of next year. Now, some might argue this levels the playing field for other buyers, which is fine, but you've removed an advantage from somebody who is better financially prepared to buy a home, which is also more beneficial to the seller. There's also home buyers out there that are prepared to take bigger risks to ensure that they secure a home. An example of that might be your neighbor list their property for sale and it's going to end up in a multiple bid situation.
Well, if you're prepared to buy that home without maybe a home inspection or you want to buy it with cash, you start to lose the benefactors of having that ability because it's a level playing field now for more buyers. So you've lost your advantage based on this coming into law. You might be prepared to take the risks, but because anybody now can really take the risk and still be protected by this law, it doesn't really give you any advantage. And it's a level playing field now. So this means anybody can really present an unconditional offer. This fee that they're going to charge is really not that much in terms of buying and selling real estate. Like there's a lot of money that goes into buying and selling real estate. Some might label it the cost of doing business to be able to go out and put multiple offers on multiple properties and get multiple properties under contract only to plan to still back out of them. This is where we need to question is that 0.25% disincentive to write frivolous offers really enough to help make sure this doesn't happen? So that's kind of what I see in terms of some of the detriments for both home buyers and home sellers.
I mean, obviously there's some good to it as well. It does protect the average home buyer who in a really busy market, which we're not in anymore, but in a really busy market, had to make quick decisions, they've got a better chance of making sure they know exactly what they're buying, which is good. But this government's plan also does have some significant holes in it that hopefully get filled before January 1 of next year. Over 50% of British Columbians live in Strata properties, whether that is condominiums or townhomes. And you might be able to do a home inspection, you might be able to send the deal over to the bank, but if you don't have the appropriate Strata documentation to also review when you're buying one of those properties, you are buying completely blind. And that, in fact, was a recommendation by the BCREA or the British Columbia Real Estate Association. The other real concern that I have as a realtor actually practicing is who collects the money when these things don't get through. I can't go into someone's house and shake them up and try and get money out of them if they don't complete on a deal.
So this means home buyers are either going to have to put money upfront when they write an unconditional offer or we're going to have to figure out a way of making sure that money goes into an account somewhere and it's easily collected by the seller if the buyer is not going to move forward with the purchase. How you do that, I have no idea because most home buyers are moving with pretty tight funds to begin with. So if you're saying that you have to now go collect, let's say, $5,000 from a homebuyer or $2,500 from a home buyer who collects that, how do you get that out of their pocket. This is really going to fundamentally shake up a lot of the way that we do real estate in BC and all over the world, because we're really one of the only places in the world to implement this except Australia, which I'll get to in a moment. One of the other holes is that sellers really are not equally benefited from this announcement. Sellers lost a little bit of their power, a little bit of their rights with this announcement and come January 1, they have put a little more of a detriment on selling your home in BC.
And the last hole is really, there's probably some unintended consequences from this announcement. This really hasn't been tested and it hasn't really been studied. Now, this does exist in Australia, it's worth mentioning that, but this had zero effect on home prices in Australia, which saw similar gains, if not bigger gains, to what we saw in Canada in terms of home prices over the course of the pandemic. So that's kind of the breakdown on the big announcement that happened yesterday. And I'm curious what you think about what this will do to the real estate market. Is it good? Is it bad? Who is it good or bad for? And what are the unintended consequences that I might have not thought about that might come out of this? It's a pretty significant thing that they're putting in here that's not overly well studied and it also wasn't well received by the real estate community. The real estate community tried to address a lot of the issues that they saw with this and they kind of went on deaf ears. In fact, here is a direct quote from the British Columbia Real Estate Association to the government.
Since the Minister of Finance announced the government's intent to introduce the Home Buyer.
Protection Period in November 2021, the British Columbia Real Estate Association has been concerned with not only the effectiveness of the policy, but also the way the government has gone about its decision making. BCREA is extremely disappointed that the Ministry has again ignored thorough research consumer protection recommendations from both BCREA and the province's independent real estate regulator, the British Columbia Financial Services Authority. In the opinion of BCREA, the Minister of Finance continues to undermine the authority of the British Columbia Financial Services Authority, the very entity that is designed to be the regulator of the real estate sector.
So be sure to leave your comment below. Let me know what you think of all this. I would love to hear from you guys. Or let me know what else you'd like to see a post on. While you're scrolling around down below, be sure to check out the link to book a time directly with me in my calendar to speak about either buying a home or selling a home in Surrey or surrounding areas. We'll make sure you're completely set up for success and you know exactly what to do in these different market conditions. I want to thank you for watching, thank you for subscribing, and we'll look forward to seeing you on the next post. Ciao.