The big chill

You’re selling the house. It’s stressful. Realtors. Photo shoot. Drone. Room measurements. Listing. Showings. Questions. Then, sooner or later, an offer. Hopefully a decent one. You negotiate the price, conditions, deposit and closing date. Sign-backs take place. Each one constitutes risk, since the thing could be lost with the wrong response. Finally, a deal is struck. Relief. Closure. You have a firm contractual commitment. The buyer is legally committed. There’s a known date which determines the packing and moving. Now you can find other home and buy or rent with confidence. Yahoo!

But wait.

Soon a deal may no longer be a deal. At least in BC, where politicians can’t keep their fingers out of anything.

This week it became the first jurisdiction in Canada (maybe the entire world) to say buyers should be allowed to walk away from a legal commitment to purchase any residential real estate without cost or consequence. “The Province is introducing legislation that requires cooling off periods for resale properties and newly built homes,” says the NDP crew. Adds the finance ministress Selina Robinson: “With this step, we’re moving ahead to protect people and their interests in the real estate market by bringing in a cooling off period for homebuyers and looking at additional measures to ensure effective safeguards are in place.”

The facts:

• Buyers will be able to wiggle out of any agreement of purchase & sale within seven days of singing the contract. No reason needed.
• The province also wants to ban unconditional offers. Therefore no home would be sold without, for example, a professional building inspection.
• Consultations will take place on how to ban blind auctions and deal with multiple bids.
• Legislation making these things law will be introduced in a few months – spring of 2022.

“Oh man,” says a broker watching this unfold from Ontario. “What a shit show this is going to be.”

BC is trying to chill a market where prices have remained firm even as sales slow because of a dearth in inventory. Owners are not selling since they fear higher prices if they try to move plus there are vastly fewer listings to choose from. Now they’ve something else to be terrified of – going through an onerous process and snagging a buyer only to see him/her/they walk away because of vapours.

Given this legislation, a sale would not be a sale. No agreement would ever be firm again, until a period of uncertainty had passed – during which no other offer could be accepted. This poses big problems for deposits, which are often $100,000 or more and delivered via certified cheque into realtor trust accounts within 24 hours of an accepted deal. No offer is cemented until the dough changes hands. But if a buyer can quit just a few days later, that money must be processed and handed back. Have you ever seen an easier way to launder a hundred grand in a week? Me neither.

And what about multiple bids? If the ‘winning’ buyer suffers spousal abuse or gets the willies in a few days, does the seller get to choose the second-highest bidder? Or does the process start again? How about the lawyers? And mutual releases which are necessary for the return of funds?

It’s hard to see how any of this makes houses cheaper, which is the self-avowed goal of the Dippers in Victoria. But it’s not hard to imagine the added seller uncertainty would deter potential vendors, further reduce inventory and increase costs.

And what benefit does this confer upon buyers?

Hmm. Well, they get to make frivolous offers. They can be completely impetuous and irresponsible for a week without penalty. But should this change become law, they can also expect a whole lot more scrutiny from real estate agents and vendors before any offer is accepted. A financial/net worth statement perhaps? Proof of income and valid mortgage pre-approval? Employer’s letter? After all, in a competitive market why would a seller blindly accept an offer from some random dude who may end up being emotional, dodgy and gone? Meanwhile more serious buyers have moved on.

In short, this doesn’t empower buyers. It would likely make buying harder. Meanwhile it sure whacks sellers, adding a heretofore unknown level of uncertainty to the process. If enacted it would inhibit and complicate the marketplace, add to vendor stress and probably reduce the incentive to sell. Hence, fewer listings and higher prices.

And don’t get me started on mandatory home inspections. Most of them are costly, useless and without warranty or guarantee. Especially when conducted by the listing agent’s brother’s cousin who used to be a barista. Inspections are worthy, of course, but mandating them will add to the cost of home ownership without conferring a benefit. This law would make every offer in BC not only invalid within seven days, but 100% conditional upon a buyer’s approval of an inspection report.

More diddling. More overhead. More anxiety. Fewer listings. More money.

And less BC.