The province has introduced new real estate regulations that take aim at shadow flipping, a practice the government calls “unethical” and “predatory.”
To end shadow flipping – the practice of realtors reselling a property before a contract closes for a higher price in order to make multiple commissions – the government says the agent must now get the sellers’ permission to transfer the contract.
Additionally, any profit resulting from the transfer of the contract must be returned to the seller.
“These rules will increase transparency and make sure that sellers’ best interests are protected,” says Premier Christy Clark in a statement. “Real estate licensees must act in the best interest of the client – not themselves.”
The new rules state that a prospective buyer has the option to remove those terms from the offer, but their real estate agent must notify the seller, who reserves the right to reject the offer. The seller’s real estate agent is also required to discuss with their clients whether or not the property is assignable and whether they’re entitled to any profit.
Finance Minister Mike de Jong says that while contract assignments serve a purpose, the new rules are meant to protect people who are selling their properties.
“The changes we have made empower sellers by providing for full disclosure, informed consent and the opportunity for sellers to insist they receive any resulting financial benefit,” he says.
The regulations will come into effect on May 16.