Increased fines, the amalgamation of 11 boards, ban on shadow flipping and an online real estate sale
After weeks of acrimonious headlines and months of finger-pointing, there’s been a few developments that should eventually help ease skyrocketing Vancouver home prices.
Triple the fine
At the end of March, the president of Real Estate Board of Greater Vancouver (REBGV), the provincial trade association that represents British Columbia’s realtors, wrote an open letter to B.C. Premier Christy Clark, criticizing the government’s decision to take steps to end the controversial practice of shadow flipping. During that same week, REBGV members (all of whom are licensed realtors) gathered at their annual general meeting. At the meeting, 80% of the members voted to increase the fines for realtor misconduct.
Up until now, the maximum fine that could be levied against a realtor that had ethically or legally strayed from regulations that govern their conduct was $10,000. Starting early April, this fine tripled to $30,000, said new REBGV president, Dan Morrison. His rationale: “The penalty of $10,000 is almost becoming the cost of doing business to some people. We need to raise that, because it’s not much of a deterrent right now.” The change to these fines came 18 months after the issue was first raised with REBGV.
Amalgamation of 11 provincial boards
Only a few weeks later, the B.C. Real Estate Association started work on the amalgamation of the 11 provincial real estate boards that currently operate in the province, including the REBGV and the Fraser Valley Real Estate Board. BCREA is the professional association that represents more than 20,000 licensed realtors that operated in the province. The end goal of the amalgamation is to create one single organization and help raise the standards of the profession.
B.C. Real Estate Association CEO Robert Laing said it’s the job of Real Estate Council of B.C. (RECBC), the regulatory agency established by the provincial government in 1958, to police provincial real estate laws that protect the public. As such, his association is looking into creating a mandate of stricter educational requirements in order for member-boards to belong to the organization, while streamlining and stiffening its own internal discipline and providing protection for whistle blowers.
The really good news is that the proposed amalgamation will help reduce the costs of running these boards by $10 million per year, due to an elimination of duplication. That’s money that can easily put towards developing stricter regulations, better enforcement and a more transparent system.
Richmond, B.C. brokerage takes matters into their own hands
Even with all the proposed and actual changes by provincial real estate associations and boards, one Richmond, B.C. brokerage decided to take the initiative and ban shadow flipping. The practice of assignment sales came under public scrutiny again, recently, when B.C.’s NDP party member, David Eby, turned a spotlight on the topic in February 2016. Eventually the REBGV launched its own investigation.
According to a 640News story, Eby shady realtors are just one of the reasons why the province is losing out on hundreds of millions of dollars in tax revenue. Shadow flipping is the use of assignment sales, a practice where the initial buyer of a property is able to resell the property to another buyer for an increased price and before the final close of the initial sale. According to anecdotal information from Eby, properties are changing hands multiple times before a deal is officially closed and, set-up a certain way, this allows realtors and investors to consecutively flip the sale of the property without paying property taxes, while driving up commissions.
Even as the media was reporting on the practice, owners and agents at Metro Edge Realty, a Richmond, B.C.-based brokerage, decided to publicly promise clients it will not (and does not) use the shadow-flipping tactic.
Cambie Corridor’s online purchase option will go live in May
But in the heated Vancouver real estate market, even regulatory changes can’t stop momentum. Scheduled to go live in May is the launch of the city’s first ever online real estate sale; up for sale are 58 pre-sale new homes that are part of the Pennyfarthing Homes’ Cambie Corridor collection, known asThe Grayson.
Using the Yongle Technologies platform, buyers can select their preferred home, their chosen colour scheme, any optional upgrades, including parking spots, storage and other customizations, as part of this online house-shopping process.
Once live, according to the marketing material, potential buyers can expect:
→ Smooth interface and simplified procedures
→ Increased transparency of process and real-time information to provide more informed purchasing decisions
→ Increased administrative efficiencies and augmented controls for secure purchasing
→ Augmented buyer control and established security
→ Ease of communication for all parties and increased buyer authority in the purchasing process
Update, as of May 11, 2016: There is no bidding in this online shopping service. Much like the in-person sales contract method, buyers using Yongle must follow FINTRAC guidelines, including providing identification and information on the source of funds. Also, a buyer does not have the option to purchase online without a member of the Yongle sales team issuing log-in credentials, which are again verified prior to completing the transaction.