B.C. bringing new measures to crack down on real estate shadow-flipping
Published Friday, March 18, 2016 10:30AM PDT
Last Updated Friday, March 18, 2016 12:41PM PDT
The B.C. government is bringing in new rules to prevent the controversial practice of shadow-flipping, Premier Christy Clark announced Friday.
Shadow-flipping, which is currently legal in the province, involves re-assigning home sale contracts before a deal is closed, in some cases multiple times. Agents can earn fees in the tens of thousands of dollars for every step of the process, which can unfold without the original seller’s knowledge.
Clark said that under the planned changes, home sellers would be required to give informed consent before their contracts are re-assigned to any new buyers. Profits made on the assignments would also be returned to the original seller.
“The shady practice that we’ve seen around shadow-flipping in Vancouver has been driven by greed – pure, naked greed,” Clark told reporters at a press conference in Stanley Park.
“The way to end that practice for greedy people is to take the profit out of it.”
Clark said the changes are regulatory, so they won’t require legislation, and she expects they can be implemented in the coming weeks.
The premier stressed that the majority of licensed realtors aren’t involved in shadow-flipping, blaming the issue on a “few shady operators, especially in the Vancouver market.”
Penalties for breaking the new rules will be decided following consultations between the province and the Real Estate Council of B.C., which is responsible for enforcing the regulations, but Clark said she hopes to see violators lose their licences.
Prior to Friday’s announcement, the council had already tasked an Independent Advisory Group with investigating the practice of shadow-flipping. The government said it’s still looking forward to the recommendations of that probe.
A crackdown on shadow-flipping isn’t expected to do much to cool Metro Vancouver’s overheated housing market, but Clark said the province is also hoping to address affordability by increasing the supply of homes.
“We all know from our Economics 101 that supply and demand determine price. Demand has grown a lot, the number of single-family homes in Vancouver hasn’t changed since 1991,” said Clark.
According to Housing Minister Rich Coleman, red tape can cost developers hundreds of thousands of dollars and cause years-long delays while trying to building new homes in parts of the region.
The government said Coleman and Finance Minister Mike de Jong will be meeting with Vancouver Mayor Gregor Robertson to discuss how they can better clear the way for potential housing developments.
Clark’s announcement came one day after the opposition NDP introduced two bills designed to address the region’s housing crisis, including one that would discourage shadow-flipping by applying fees to every step of the process.
The proposed measure would charge the Property Transfer Tax, which is currently only applied once before the final sale of a home, every time a sale is assigned.