New regulations designed to crack down on fraud will also hurt honest real estate agents, say realtors in Langley and the Fraser Valley.
This winter, the Office of the Superintendent of Real Estate has put forward new rules that are aimed at banning realtors from representing both buyer and seller in a real estate transaction.
The Fraser Valley Real Estate Board, (FVREB) which includes realtors from North Delta to Abbotsford and Chilliwack, is protesting the ban on “dual agency.”
“It’s going to affect the buyers and sellers,” said Leo Ronse, a 22-year veteran realtor in Langley.
As long at there is transparency and professionalism, dual agency is not a problem, Ronse said.
But the province’s real estate watch dog is ending the practice to prevent fraud, particularly a type of fraud known as “shadow flipping.”
In shadow flipping, a realtor approaches a homeowner, often an elderly or longtime resident, and offers to sell their home for them. A home that should be valued at $1.5 million might be sold to an associate of the realtor for $1 million. The new owner then turns around and re-sells the house again at proper market rates, with the buyer pocketing the difference and the realtor collecting commissions on both sales.
Police investigations in Metro Vancouver have also turned up links between money laundering through B.C. casinos and the purchase of high-end real estate in the region.
Ronse argues that the problems with shadow flipping are primarily in Vancouver.
Beyond shadow flipping, there are legitimate reasons for re-selling houses, including people who buy houses, fix them up, and then sell them again as a business, Ronse pointed out.
The rules can be so restrictive that a realtor can be entirely forced out of a transaction, dropping representation of both buyer and seller, Ronse said.
If he were working to sell a house, and a client of his from another transaction asked to look at it, Ronse said the new rules might mean he would have to stop representing both of them – the rules would say he knew too much about the potential buyer. Both seller and buyer would have to find new realtors to represent them.
The FVREB is also pushing back, writing a letter to the Real Estate Council of B.C.
“Requiring licensees [realtors] to walk away from these clients at their time of greatest need and emotional pressure – during the offer and negotiation – does these clients a great disservice, eliminates choice, and trivializes their relationship with their agent, which has developed over weeks, months and often years.”
The B.C. Privacy Act and professional standards already cover many of the issues at stake, the letter argues.
Ronse said the solution is to hammer the bad realtors who are ripping off clients with heavy fines.
“If you fine them a comission, who cares, they’ll just do it again,” he said.
The new rules are expected to come into force this spring.