Buyers – How does this affect me?
Buyers need to be aware that any offers they are making on residential real estate after January 3rd, 2023, will be subject to the new 3 day Home Buyer Recission Period (HBRP) rule, and there is no way to waive this subject or declare it fulfilled. This means no more unconditional offers. If competing in a multiple offer situation, now everyone will have this one subject at a minimum, making it a level playing field for everyone. This also offers another layer of protection for a Buyer when purchasing property, especially in a multiple offer situation where unconditional offers are more common.
Using the HBRP
If a buyer chooses to rescind their offer using HBRP, they will then owe the Seller directly a fee equal to 0.25% of the purchase price. If the agreed purchase price of the property is $1,000,000 (one million dollars), then the associated fee would be $2,500 (two thousand five hundred dollars). If any monies are held by the brokerage as a deposit for the property, then the brokerage has the right to pay the Seller directly the 0.25% and then return the rest of the deposit monies to the buyer. However, if monies are not being held in trust by the brokerage, then the Seller must seek compensation from the buyer directly, possibly using small claims court or the civil resolution tribunal if the buyer is unwilling to pay.
So how can Buyers show Sellers that they are serious about their offer?
Buyers can be prepared with their offers by having deposit funds ready in the form of a bank draft to be submitted with the offer or wire transfer funds already in trust with the brokerage, so that when their offer is accepted, the seller has the reassurance that the buyer is serious about purchasing the property and is willing to stake at least 0.25% of the purchase price on the fact that they are serious purchasers. This shows the Seller that the Buyer is willing to share in the risk associated with an accepted offer.
Most often Buyers will be advised to include beneficial subjects when purchasing residential real estate, such as a subject to financing, building inspection, etc. Most often, a REALTOR® will advise their Buyer that if they have a reason for wanting to rescind the contract, such as negative findings in a building inspection, or difficulty obtaining financing at a rate that is agreeable to them, then they should use that reason to collapse the contract using one of the existing subjects, rather than the HBRP.
What are the risks?
The risks to Buyers are minimal, with the exception of the fee to be paid if the HBRP is exercised, this rule change benefits buyers by protecting them from decisions perhaps made in haste in a multiple offer situation and gives them a chance to “sleep on it” and decide later. This would become expensive for the Buyer if, for example, they were engaging in offers on multiple properties at once and then later deciding which one they actually want, or if they were utilizing the HBRP on several properties in a row because they were having difficulty deciding.
As with any changes to the Property Act, the details can be confusing. Be sure to enlist the services of Rebecca Ryane REALTOR® to help you understand all the potential risks when entering into a purchase agreement contract.