It’s no secret that shadow flipping has been considered a shady form of real estate for quite some time, especially in BC where foreign investment is prominent. After the crooked system was exposed last March, Premier Christy Clark described the process as “greedy”.
So what is shadow flipping exactly? The Globe and Mail states it simply and describes the process as “when a home-buyer sells a contract to another buyer before the deal with the original seller closes.” Basically the end buyer pays a significant amount more than the initial seller receives and the final profit is shared amongst the home-buyer and often times, the REALTOR®.
Recently, new regulations have been enforced for licensed agents. Contract assignments are still legal however, the original seller must agree upon the arrangement and if the deal is closed before the property is officially resold, the original seller must receive the profit.
BC Finance Minister Mike De Jong states, “The idea here is to better protect sellers in the real estate market and hopefully address in part some of the concerns we have heard about the conduct on the part of some realtors.”
With the new regulations on shadow flipping along with the recently announced foreign property transfer tax, data containing transfer property ownership and transfer tax information will be shared with Revenue Canada and will take better care to be collected under Canadian Law which should have been the process all along. Unfortunately, a federal audit found required filings were lacking so new policy rules should work to improve this process.
The province also hopes that by discouraging shadow flipping, real estate will be more affordable to actual residents who want to physically reside in the property. In an article published by the Globe and Mail, BC Finance Minister Mike de Jong says that he’s confident provincial auditors will be more successful and “the objective here is to get beyond the theory, get beyond the conjecture and the speculation and actually have hard data”.
In addition, for the first time in almost twenty years, the city of Vancouver will require potential property investors to disclose whether or not they’re a Canadian citizen in an effort to control BC’s hot market. There have been many concerns about whether or not foreign investors are the cause of unaffordable Vancouver-area housing prices, but the exact answer hasn’t been officially verified as specific data hasn’t been collected. By enforcing these new policies, it will help to avoid non-compliance among various Lower-Mainland firms and collect more accurate information.
While official conclusions of these new rules likely won’t produce numbers until next year, your main focus should remain on being a successful agent in the realty industry as it stands today and continue closing deals using honesty and integrity. A proactive way to connect with prospective clients is to ensure your website is inviting and effective resulting in engagement from your client base and of course, directing prospective home-buyers to choose you as their REALTOR®. Consumers are connecting with digital forms of advertising more than ever before and if you don’t have a clean and engaging website, there’s a good chance you’re losing out on great opportunities. Don’t miss out! Contact us today to learn more about how our website products can help you become a leader in the marketplace.