BCFSA's recommendations for cooling-off period and other measures
At a glance (5 minute read)
BCFSA published their report to the provincial government with recommendations on how to enact their proposed measures, including the cooling-off period.
- They recommend the cooling off period will be three business days and will be non-waivable.
- Buyers who back out should pay a termination fee of 0.1 per cent to 0.5 per cent of the purchase price.
- They recommend the government also offer a five business day pre-offer period in addition to the cooling-off period.
- They recommend the provincial government should continue to explore open bidding, and require standard clauses in the contract of purchase and sale.
The BC Financial Services Authority (BCFSA), BC’s real estate regulator, announced yesterday its recommendations to the provincial government regarding the proposed cooling-off period, the risks associated with unconditional offers, and potential alternatives to so-called “blind bidding”.
BCFSA is asking the province to require that:
- Sellers cannot accept offers until their home has been listed for five days.
- Buyers can back out of a contract within a three-day cooling-off period so long as they pay a termination fee of between 0.1 per cent and 0.5 per cent of the purchase price.
- Property disclosure forms, including key strata documents, be made available to prospective buyers at the time of listing or offer for sale.
- Sellers disclose offers to all prospective buyers who submit an offer.
These recommendations are based on a seven-month public and stakeholder consultations that BCFSA undertook.
We’re now working with other real estate organizations to assess what potential impact these changes would have on home buyers and sellers if the province chooses to adopt them.
Below is a more detailed summary of the recommendations that BCFSA announced yesterday.
BCFSA advises government to set the following parameters for a homebuyer protection (cooling-off) period:
- Three clear business days.
- Narrow exemptions.
- Termination fee (between 0.1 per cent and 0.5 per cent of the purchase price).
- Consider requiring disclosures of other active offers by prospective buyers.
- Require sellers to provide reasonable access to the property for buyers to perform due diligence.
What BCFSA says about these recommendations: “The advice on the duration of a homebuyer protection period is intended to strike a balance that minimizes potential delays in the marketing process for sellers while being long enough for a buyer to perform some meaningful due diligence in most cases.
"Given its importance and to ensure a level playing field, BCFSA’s advice is that the homebuyer protection period be non-waivable and applicable to substantially all transactions. The modest termination fee strikes a balance between discouraging frivolous offers and recognizing the disruption in the selling process.”
Pre-offer period in addition to the cooling-off period
BCFSA advises government to:
- Establish a five-business-day pre-offer period; and
- Require that property disclosure forms, including key strata documents, be made available to prospective buyers at the time of listing or offer for sale.
What BCFSA says about these recommendations: “A five-business-day pre-offer period—the minimum time spent on the market before any offer can be accepted—would begin when the property is listed or offered for sale. This would give buyers the opportunity to initiate due diligence activities, while simultaneously preventing pre-emptive time-limited offers, often referred to as 'bully offers.'
"The pre-offer period was proposed by multiple participants in the consultation period. BCFSA agrees that as part of a broader set of initiatives, a pre-offer period can provide an opportunity for careful review by prospective buyers and enhance the transparency of the existing transaction process.
"To support the buyer’s ability to conduct due diligence during the pre-offer period, BCFSA also advises government to enhance transparency at the time of listing or offer for sale through mandatory property disclosure forms, including key strata documents.”
BCFSA advises government to:
- Further explore open-bid, open-end auctions to enhance transparency in the transaction process; and
- Require inclusion of standard clauses in the contract of purchase and sale.
What BCFSA says about these recommendations: “BCFSA sees value in a model that would allow prospective buyers to know the number and content of competing offers, while providing time to adjust their offers in response to legitimate competing bids. However, further work is needed to understand the full implications of open bidding in B.C.’s real estate market.
"As a measure to enhance transparency in the existing bidding model, BCFSA advises government to consider a requirement for sellers to disclose the number and prices of offers received when multiple offers have already been submitted and prospective buyers are being asked to submit counter offers, also known as a 'bidding war.'
"BCFSA’s advice includes considering disclosure from the buyer to the seller of any other active offers they have made to help signal the seriousness of an offer. It also includes a requirement that the contract of purchase and sale includes standard optional clauses related to financing, home inspection, insurance, and legal advice.
"Mandating the standardization of optional clauses in the contract would help ensure that buyers are aware of their importance before actively considering to decline them.”
BCFSA advises government to require that sellers make a disclosure of offers to all prospective buyers who submitted an offer.
What BCFSA says about this recommendation: “After an enforceable contract is in place, BCFSA’s advice is to require sellers to provide anonymized disclosure of offers, including the sale price and number of offers, to all prospective buyers who submitted an offer.”
What BCFSA says about potential next steps: “BCFSA recognizes that its advice to government impacts existing contract law as well as long-standing real estate transaction practices. As such, the implementation of these enhancements will require thoughtful consideration.
"Further engagement with industry and an extended implementation timeframe to embed changes to industry practice as well as standard forms and contracts will be important.
"Sufficient lead time is also necessary for the industry and consumers to understand the details of the homebuyer protection period and ensure a successful implementation.”