Retracting an offer in BC: "Cooling Off"

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mr_l
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Retracting an offer in BC: "Cooling Off"

Post by mr_l »

Hi there,

OK so I'm just going to throw it out right now that I screwed up. I found myself in a high pressure situation and I signed on the dotted line. Living in Vancouver, need a bigger house, found one we liked on its opening open house weekend. It's a non-managed strata, three units (triplex), and is a new build still under construction but almost finished.

We wanted to make an offer which were being accepted the next day (Monday) at 5:30 PM. Our realtor told us he would "run the numbers" and show us comparables, but he didn't get us this information until literally 5:25 PM with a tonne of PDFs emailed. He was on the phone with me and basically said he needed a number, told me it was definitely a multiple offer situation...blah blah blah, I went along with an over asking, subject-free, and 30-day close. OK, obviously stupid, but that's what "everyone" is saying you have to do.

So as the dust settled, I looked through the documents he sent and realized I totally overpaid - like the place was priced way over the comparables on a $/sq ft basis and especially the lot size basis. If you're a local, it was west side pricing on an east side property. So considering this price point was top of our range (7x gross household income, mortgage will be 5x gross household income assuming we can get decent offer on our current place which we still need to list and sell - again, advice was to buy first then sell in this crazy market, which made me uneasy - to be seen what happens).

Feeling depressed, I read through the "Buying A New Home" guide from Homeowner Protection Office of BC. That's when I came across something called "Cooling Off" - where the buyer has 7 days from the time I receive a copy of signed contract & Disclosure Statement (both occurred on Monday) to withdraw the offer.

Wow - can I do this? Nothing about this in the contract. Guide makes it sound like it is for pre-sales...nothing about this being a pre-sale in the contract but the guide's definition is "home that is planned or under construction, for which a contract may be signed between a buyer and builder or developer" - and I think it counts as under construction as it is not yet complete and they are supposed to provide us with documentation once it is finished.

OK, so I really really screwed up. Possibly deserve the consequences for being so foolish by buying in an overpriced market (Vancouver), buying before I sell, and going along with signing when really I wanted more time to carry out due diligence. If you can set all that aside, please help me with this "Cooling Off" business. I googled everything and couldn't find anything with specifics. If it is a 7-day period then I have until this Sunday to initiate whatever needs to be done to withdraw the offer.

Thank you for the advice (and the criticisms will be totally justified - I deserve them)!
mr_l
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Re: Retracting an offer in BC: "Cooling Off"

Post by HardWorker »

Keep in mind I have no legal training, nor know the workings of your crazy market out there, but here are my thoughts.

1) If you don't have a lawyer to close this deal, then you should have a lawyer and this is a perfect question for him/her.
2) Call up that agency that published that home buying guide.
3) Ask another realtor these questions.
4) While recording the phone call, ring up the sales rep and ask how you were expected to comb through all that data in 5 minutes. How you felt under extreme pressure to sign something and overpay, etc.

And if this works out and you can get out of this deal, go look in the mirror and tell that person what he signed (which he'll never do again), was foolish. To be as polite as possible.

Edit: I did a little googling and it sounds like that cooling off period does apply to you luckily. A good link is the CMHC site. The contact info given on the bottom sounds very good in your case, including talking to a lawyer for 30 minutes for just $25, that's quite a bargain. http://www.cmhc-schl.gc.ca/en/co/buho/c ... u_007b.cfm
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Re: Retracting an offer in BC: "Cooling Off"

Post by AltaRed »

Based on your info, I would say you fit into the profile. Get a lawyer this morning. They will either all be leaving today, or have left already, for the Easter weekend.
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Re: Retracting an offer in BC: "Cooling Off"

Post by mr_l »

Thanks for the advice everyone. I tracked down a lawyer and had a chat by phone (not like he looked at actual contract or specifics, but I laid things out from my no-legal-background buyer's perspective). This took persistence as AltaRed was right - one had out-of-office voicemail's due to long weekend, one said it wasn't their area (even though they were real estate, one said he deals with things that run along smoothly), one said he's booked up today...

My understanding from what the lawyer said:
So the "cooling off" period is described in "REDMA" Real Estate Development Marketing Act and applies to "development property", which is defined as several things but most relevantly a stratified property of 5 or more units. I guess "strata" means stratified? Who knew? So since there are only 3 units, can't rescind. Another definition in REDMA of development property is 2 or more shared interests in land. The lawyer asked me to look at the "legal description" in the contract and was surprised that I didn't see anything that referred to stratified or strata....so perhaps it is shared interest in land (but in my mind it definitely seems like a strata - since it's a triplex - instead of shared land). So maybe that's something... If that is the case, then developer would have needed to give me a (thick) disclosure statement (different than the short page checklist I received) - and if he didn't then I can rescind even if the 7 day period has passed.

If REDMA doesn't apply, then to "break" the contract I'd have to show that the contract was never valid in the first place - maybe there's some substantial error or omission in its contents, then I could get out of it but might have to go to litigation/court ($$$). Finally, I go to developer and ask the to cancel contract - maybe they'd take part or all of deposit. They would relist the property and if they got same or more than my offer then probably all good. If they got less, could come after me for the difference.

My main concern about the valuation of the home - I called my realtor to discuss. He thinks it's a reasonable price - everything is going up so fast. So I'm curious to see what the adjacent unit sold for (or if it's still on the market).

So my next steps are to get a lawyer to look over the contract. Luckily, it seems there is no immediate rush anymore (re: 7 days), so I'll book an appointment for next week.

Thanks, and yes.. I'm an idiot!
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AltaRed
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Re: Retracting an offer in BC: "Cooling Off"

Post by AltaRed »

I don't know. If you truly have buyer's regret, just walk back into the builder's office today and ask that the contract be torn up. If the builder truly has had multiple offers, then he shouldn't have any marketing/selling concerns. He'll just reach in his file cabinet for the next best. Worst case may be thats you lose your deposit.

Another possible out is if you fail to meet the 'conditions' of your contract, e.g. financing, legal review of contractual domentation, etc. It would expire at the end of the 7 or 10 days or whatever you put in, if the conditions have not been removed.

Your purchase documentation you have should tell you how the title would be legally structured, e.g. party walls, shared structural responsibilities, care of the land component, etc. Unless the 3 units are side-by-side (in which case there could be 3 freehold lots), the land the complex sits on will likely be based on undivided 1/3rd interests. Stratas can contain both undivided land interests and/or freehold interests.
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Re: Retracting an offer in BC: "Cooling Off"

Post by Insomniac »

AltaRed wrote: Another possible out is if you fail to meet the 'conditions' of your contract, e.g. financing, legal review of contractual domentation, etc. It would expire at the end of the 7 or 10 days or whatever you put in, if the conditions have not been removed.
He said his offer was "subject free". I would never put in an offer without at least a "subject to purchaser obtaining acceptable financing".

For a strata, I would add "subject to review of strata council minutes and other documentation". However, since it sounds like this property has not the strata plan registered at the LTO yet (the legal description doesn't read something like "strata lot x of strata plan xxxxxx ...") there would be no strata documentation to review.

As you suggest, asking the developer to simply tear up the contract might work. OP might try showing him the guide. https://www.hpo.bc.ca/files/download/Bu ... ewHome.pdf
I can't see where the cooling off period applies only to developments of 5 lots or more.
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AltaRed
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Re: Retracting an offer in BC: "Cooling Off"

Post by AltaRed »

Missed the part about 'subject free'. Never would do a deal without at least what you suggest.... review of documentation. It has to be disclosed what the legal structure would be, etc.
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Re: Retracting an offer in BC: "Cooling Off"

Post by kcowan »

I think your issue is with your realtor. Good luck with that! The lack of comparables within a reasonable period is your best defense. Just talk to your realtor about the 5 minutes notice to read XX pages. And that you essentially relied on his opinion. And now you believe that opinion was faulty/erroneous.
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Re: Retracting an offer in BC: "Cooling Off"

Post by izzy »

In Manitoba a new condo act came into force last year which essentially allows a buyer to back out for ANY reason during the first 7 days after acceptance of the offer.Manitoba law usually follows the example of laws in other province and your mention of 7 days fits that scenario so it MAY be the same in BC.
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Re: Retracting an offer in BC: "Cooling Off"

Post by Just a Guy »

So, is this a "presale", if so, you need to start thinking about your seven days again...
Pre-sale purchasers will be asked to enter into a pre-sale contract with the builder or developer, and to make a deposit. The deposit may be held in trust or protected by a policy of deposit protection insurance. Typically the contract will stipulate when the unit will be constructed and completed and the xed price for the home as well as any changes or substitutions that the developer may make under the contract.
Once the contract is signed by both parties, it is legally binding. For your protection, seek the advice of a lawyer experienced in pre-sales agreements before you sign the contract. The contract provides you with the right to purchase the unit in accordance with the terms and conditions of the contract; however, there may be exemptions and reservations that could signi cantly change what you thought you were buying.
You have a seven-day “cooling off" period from the time you receive a copy of the signed contract or the time you acknowledge receiving the Disclosure Statement (whichever comes rst) in which to finalize the sale or withdraw your offer.
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https://hpo.bc.ca/files/download/Bullet ... ewHome.pdf
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Re: Retracting an offer in BC: "Cooling Off"

Post by mr_l »

Thanks all. I guess a question is - what's the definition of a pre-sale? Construction is not complete so that makes is pre-sale like. However, I only saw the property (at the open house) some 30 days before the anticipated construction completion.... Very different from a typical pre-sale where you go to a sales centre, see a scale model of the place and sample interior, put down a deposit for a unit that will be completed in over a year away.

They didn't give me a pre-sale contract so that seems like a clue. And I never set foot in any sort of sales office either. I would love to think of it as a pre-sale...and if I can get them on that technicality I would, but the lawyers I talked to didn't think that was a viable route. And the "cooling off" period rescinding would only apply if the strata "development" had 5 or more units.

I am still going to have a lawyer look at the contract. If there is a relatively easy way out, I'll take it! A less than promising sign is that the adjacent unit to ours, with similar stats and pricing, concurrent open house, has NOT been sold. How could our unit (with about 50 sq ft less finished space, and a bit smaller of a yard) get multiple offers and the near-identical slightly better unit not get an accepted one? I guess I have trust issues with when our realtor said it was definitely a multiple offer situation on our unit, in fact, I asked him about the other unit on Tuesday and he said it probably sold with multiple offer situation too...now I know it didn't sell :(

I spent some time at the place today. It's a good neighbourhood. The place might be small (1250 sq ft - 2 adults, 3 young kids), we might have overpaid even in the standards of Vancouver's totally overpriced market, and financial stability as I've enjoyed it might collapse once interest rates rise, China or Canada cracks down on foreign outflow/inflow, my spouse or I lose a job, etc. Yep, I've got a pretty gloomy outlook right now - but I'm lying in the bed I made.

Happy long weekend,
mr_l
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Re: Retracting an offer in BC: "Cooling Off"

Post by nisser »

I can't commend on the other stuff but definitely ditch the realtor.
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Re: Retracting an offer in BC: "Cooling Off"

Post by patriot1 »

Assuming that when OP said "our realtor" he means the buyers' agent, that agent only knows what the seller's agent tells him about offers.

Ontario has recently brought in legislation requiring transparency in offers, I don't think BC has anything like this.

http://www.theglobeandmail.com/life/hom ... e24915665/

Bottom line is that it's your responsibility as a buyer (of anything) to decide what the property is worth. You can't back out of a sale just because later you think you paid too much.

Edit: It occurred to me that if the price is truly out of line with the market, OP may be unable to obtain financing. If the offer had been made conditional on financing, that would have provided a way out.
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Re: Retracting an offer in BC: "Cooling Off"

Post by kcowan »

mr_l wrote: I went along with an over asking, subject-free, and 30-day close.
I think subject-free means no conditions.
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Re: Retracting an offer in BC: "Cooling Off"

Post by Just a Guy »

I've found that in many unclear legal matters, it usually comes down to "who blinks first".

If I were you, I'd retract the offer based on the "cooling off period" legislation. Do it in writing today to ensure you're within the 7 days, don't leave any obvious loopholes open. Tell the seller that, you feel that, with the information you obtained after the fact, that you made a mistake and are legally entitled under the legislation to withdraw your offer. Don't say anything else. The less you say, the more room there is for you to make a mistake.

Now, since the legislation is unclear, it becomes a game of poker to see who's bluffing. Chances are, the seller doesn't know the law any better than you or anyone else...is he really going to push it when there is doubt he'll win? Don't blink and you may get out of it, even if you weren't technically supposed to.
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Re: Retracting an offer in BC: "Cooling Off"

Post by patriot1 »

This is not a pre-sale. That's a specific type of contract entirely different from the sale of a listed property. Trying to get out by claiming it is one amounts to telling the seller you are going to walk and if they don't like it they can sue, which is very likely to happen.
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Re: Retracting an offer in BC: "Cooling Off"

Post by kcowan »

It appears the the property is completed but never occupied. Very different than presales. I think the issue is with the realtor. But realtors are notorious for getting away with all measure of questionable practices.
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Re: Retracting an offer in BC: "Cooling Off"

Post by Just a Guy »

You notice, I didn't say withdraw based on the cooling off period for presales, I said based on the legal "cooling off period". The legislation, from what I've read, covers more than just presales, but it's unclear as to exactly how far it can be pushed...

As I said, don't say anything more than just withdrawing under the cooling off legislation. It could be a stone cold bluff, but sometimes bluffing wins.
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Re: Retracting an offer in BC: "Cooling Off"

Post by mr_l »

Update: accepted my fate and have lived in this unit ever since. Definitely over paid :cry: . On the upside, it has been a great home and neighbourhood, kids are happy here. On track to have the mortgage down to x2 gross household income later this year. :thumbsup: Hopefully mortgage free by 50.

Thanks for all the helpful advice, ideas, and perspectives - those few days were a real low and it was nice to have a group to reach out to!
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