Province addresses shadow flipping in real estate

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VICTORIA – The British Columbia government is moving to protect property owners from predatory conduct in the real estate market by stopping so-called contract flipping without the sellers consent.

Finance Minister Mike de Jong says new rules starting May 16th will require property offers to include two separate terms dealing with contract assignments in pending deals.

He says the rules require real estate agents to include the consent of the seller to transfer the contract to another buyer and spells out that profits from the contract change must go back to the original seller.

De Jong says the changes are designed to prevent situations where a buyer profits by selling a home at a higher price before the closing date of the original sale.

Premier Christy Clark has said “pure, naked greed” is driving real estate agents to flip a property multiple times at higher prices before a deal closes, allowing agents to continue making commissions while buyers avoid paying the property purchase tax.

De Jong says the government is also amending property transfer tax forms to collect data about the country of origin of people buying real estate in BC.

Vancouver Mayor Gregor Robertson welcomes the crackdown.

“Shadow flipping is a loophole in the way the real estate industry operates so it’s good to see the loophole being addressed. Obviously it is being abused”

Robertson says the provincial government still has to be more active in addressing affordable housing.

Here is the full release from the Government of BC.

Shadow flipping

 

Expert says these new rules won’t help fix the housing market

Tom Davidoff with the Sauder School of Business says the new rules should stop shadow flipping but doesn’t do anything to help with the other problems in the market.

“This does nothing to fix the issues. They are not dealing with the tax situation which basically leads to a red carpet rolled out for people who want to park cash here in Canada.”

He says the province needs to find out who is causing the problems.

“If the owner of the home isn’t renting it out and isn’t paying taxes in Canada, they need to pay a surcharge. So if you pass that law, you get revenue and you find out how many homeowners fit into that class.”

Davidoff says there is too much single-family zoning that stops affordable housing developments.

He gives the Arbutus neighbourhood as an example.

“There’s no public justification for it other than a few affluent neighbours who prefer it.”

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