Monday February 28, 2022 | VANCOUVER & VICTORIA [Updated March 2, 2022 with comment from BC Minister of Finance]
by Mary P Brooke | Island Social Trends
Today the BC Real Estate Association (BCREA) said they are concerned about the housing market in BC, the real estate transaction process and consumer protection.
BCREA aims with their proposal today, to “increase consumer confidence and protections within the residential real estate market, while providing regulatory clarity to the 24,000 Realtors that BCREA represents”. There are 1,527 are active with the Victoria Real Estate Board.
White paper:
BCREA has issued a white paper, called A Better Way Home: Strengthening Consumer Protection in Real Estate, offers more than 30 recommendations spanning four areas:
- addressing housing supply issues,
- enhancing consumer protection in real estate transactions,
- evolving the real estate sector, and
- contributing to the creation of a world-leading regulatory structure.
Apparently the white paper incorporates findings from seven focus groups with consumers and Realtors, years of survey data, and a detailed analysis of market interventions worldwide.
“Make it matter” says BCREA:
Today BCREA CEO Darlene Hyde emphasized several times that the problem with housing availability is supply. The responsibility for resolving that challenge lies with the provincial government, she said.
The BC government issued a 30-point housing affordability plan back in 2018. That plan highlighted ways to stabilize the market, cracking down on tax fraud, increasing supply, security for renters, and supporting partners to build and preserve affordable housing.
Hyde recommended that local governments (which operate within provincial regulations) need to finding ways within their official community plans (OCPs) to address housing supply, including undertaking “housing needs reports and reviewing zoning bylaws”.
“Make it matter,” she said as to what governments should be willing to undertake.
Island Social Trends questions to BCREA CEO Darlene Hyde today:
- Island Social Trends: The provincial government says the BC real estate market functions like a stock market. How would BCREA’s proposal for a pre-offer period assist with cooling that situation? It is still a bidding process, and prices would still go up, not down.
- “The idea of a pre-offer period is intended to help consumers make informed decisions in market conditions that can be very challenging for them. Under such competitive conditions, would be buyers may feel like they need to make an offer quickly to simply have a chance at a property. This isn’t always in their best interest. The period over pre-offer period would give them some extra time to ensure they have done their due diligence and are comfortable and confident with the offer they plan to make.”
- Island Social Trends: Would a pre-offer period work to the advantage of Realtors, in that they have a preview of who might be bidding on a property?
- “The primary intent of the pre-offer period is to help consumers. On the buyer side, it gives them time to make sure the offer they are making is in their best interest. For sellers, compared to if a cooling off period were to be implemented, it would bring more qualified offers to the table. A Realtor’s duty is to serve in the best interest of their clients and if the pre-offer period does that and that results in less prospective buyers out of their comfort zone, then a Realtor also benefits, no matter the outcome of the transaction.”
- Island Social Trends: How involved does BCREA intend to be in helping to assure there is a solid renters market? Will BCREA be encouraging to its Realtor membership to propose rent-to-own options to buyers and sellers, as a way to encourage as many people finding homes as possible? Or is the BCREA approach that all sales must be ‘done and done’ so that sellers have a quick way to recoup investment out of their property?
- “Having adequate housing supply also means having adequate housing options and renting is a part of that equation. This is why we encourage all levels of government to establish a permanent National Housing Roundtable that brings stakeholders from all corners together to find creative solutions to the housing supply crisis Canada is experiencing.”
Tamping down the ‘stock market’ phenomenon:
In the past couple of years, Premier John Horgan and now two finance ministers have said that the BC real estate market performs like a stock market, that housing supply should not be seen as an investment instrument for those with the resource to play in that scenario, but a means to provide people with places to live.
Today BCREA seemed to align with that, saying their proposed five-day pre-offer period would allow buyers to get their ducks in a row, such as getting inspections done and lining up prospective financing. That would give some room for first-time buyers and others who are not super-resourced or sophisticated in real estate transactions to take part in the bidding process.
The pre-offer period doesn’t change the fact that prospective buyers would still need to be financially within range of home ownership (in a market where prices continue to rise). Hyde said today that scenario would actually “favour sophisticated and well-resourced” buyers.
The pre-offer period scenario might actually offer advantage to attentive Realtors (on behalf of sellers) as they see the pre-offer interest roll in…. a known defacto short list would enable Realtors to assess interest in the property and the range of buyers who intend to participate.
Drop the cooling off period:
BCREA proposes that the BC Government not move ahead with implementing a ‘cooling off period’ or restrictions to ‘blind bidding’. BCREA feels these measures would have “ambiguous impacts on housing affordability”. It would likely in many cases mean that Realtors work hard to ‘complete’ sales that may in fact never complete.
The proposed pre-offer period would allow the buyer to conduct their due diligence while also allowing them time to consider whether the offer they intend to make is in their best interest.
BCREA instead recommends “greater transparency on the number of offers to assist buyers in making more informed decisions”.
Instead of mandating subjects, the paper recommends that the real estate sector explore amending BCREA’s standardized legal forms for Realtors (standard forms) “to balance the right of all parties”. BCREA says that “more transparency in the real estate transaction process can be achieved by mandating that property disclosure statements and strata documents be made available at the time of listing”. This puts a lot more front-end load on the work of the listing Realtor and more onus on the seller to be fully intentional to sell. That could in fact serve to sift out speculative sellers.
A professor from SFU said during today’s BCREA media session that first-time buyers would not be well-served by the cooling-off period, but that the system would “deepen asymmetry between experienced and inexperienced buyers”.
The BC Minister of Finance responded (on March 1) about the BCREA white paper, including that the pre-offer period would still present risk to prospective homebuyes.
Rental market component:
BCREA suggests there be a National Housing Roundtable “to foster collaborative efforts to increase housing supply across the continuum”.
Today Hyde said that includes the need for supply within the rental market. Some people who rent may seek to be home-owners.
Meanwhile, many people will likely never be able to afford to own a home. For them, the rental market is essential.
Rent-to-own:
Realtors sell properties — it’s their profession and source of personal income. It remains unanswered whether Realtors in BC would begin to proactively encourage rent-to-own contracts between buyers and sellers, instead of going for the full slam-dunk sale.
Encouraging rent-to-own options would require convincing sellers to be satisfied with only part of their expected return up-front, and having to deal with an ongoing business relationship with the buyer, perhaps over several years. All of that would require a significant shift in how people see the use of their money within home ownership and would require Realtors to be on board with perhaps receiving less or delayed commission income.
Attitude shift:
Underpinning all of the shifts outlined or implied in the BCREA white paper would require a change in the attitude of Canadians — or more so the policy of the federal government through the Canada Mortgage and Housing Corporation and indirectly the banking and lending sectors — that home ownership is a right.
There would need to be a shift in what Canadians expect their standard of living to be, or at least how quickly they might reasonably expect to improve it through property ownership.
Whacking at FSBOs:
Unsurprisingly, BCREA today took the opportunity to disparage the for-sale-by-owner (FSBO) process which is a sector of the property market that works in direct competition to the work of licenced Realtors.
Certainly there is expertise among Realtors and processes that are intended to protect buyers and sellers, and a profession to protect. But there are circumstances where a straightforward transaction without Realtor involvement is suitable.
Other consumer protections:
Today BCREA took some leadership with their recommendations for “other consumer protections” which they described as:
- increasing licensing standards for new entrants to the profession,
- support for managing brokers (such as a best practice guide and related sources),
- establishing adequate sector representation with in the regulatory structure, and
- ensuring that money laundering has no place in real estate.
More industry input:
BCREA is concerned that the BC budget (which included the cooling off period for all residential real estate transactions) should have included real estate sector input.
“While we are supportive of policy changes to strengthen consumer protection, it is our position that this policy was announced in haste with insufficient research and without due regard for the work already being undertaken by BCFSA and the sector”.
BCREA said “this lack of fulsome consultation prior to policy announcements has been a longstanding issue within provincial real estate”.
However, the provincial government is, of course, fully within their right to introduce policy that seeks to align market conditions with their view of achieving affordability for British Columbians.
===== RELATED:
VREB: Greater Victoria housing market will be slow to change (February 1, 2022)
Oct 2021 real estate: prices up but inventory down (November 12, 2021)
Unusual real estate market during COVID summer (September 1, 2020)