Sellers – 3 day Home Buyer Recission Period (HBRP)
Sellers need to be aware that any offers received 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.
Sellers – How does this affect me?
When a Seller is receiving an unconditional offer, except for the new 3 day Home Buyer Recission Period (HBRP) subject, then most often the REALTOR® will recommend that a deposit be paid upon acceptance, in case the HBRP is exercised. That way the funds will be held by the brokerage and can be paid out immediately if required.
When a Seller receives a conditional offer, except for the 3 day HBRP subject, then it is most likely that a buyer would use one of these subject reasons to collapse an offer if they wish to do so, rather than pay a fee for collapsing using the HBRP.
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.
What are the risks?
The risks for Sellers are that their residential property is tied up for 3 days at least without knowing if the Buyer is going to proceed. In a hot market, this could mean loss of momentum on the property if the deal collapses because of the HBRP, and in the case of unconditional offers, not knowing if your property is truly sold until 3 days later. In a slower market, the HBRP has less of an effect because most offers in a slower market have other beneficial subjects. Another risk for Sellers is that if the HBRP is exercised, and deposit funds are not held by a brokerage, then the Seller must seek compensation from the Buyer directly, not through REALTORS® or brokerages. This could pose a problem if a Buyer refuses to pay after having exercised HBRP.
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.