The BC government is reacting prematurely by imposing strict new rules on contract assignments, known as “shadow flipping” under a term coined by mainstream media in recent coverage, the president of the Real Estate Board of Greater Vancouver wrote in a letter to BC Premier Christy Clark March 22.
Darcy McLeod used strong language to express his and the board’s concern over what he described as implementing a long-term policy for a short-term problem that he said had been overly sensationalized by mainstream media.
On March 18, the BC government announced two new rules for contract assignments in an attempt to curb the practice of using the system for real estate speculation and price-jacking. Contract assignments will now require the express consent of the original home seller, and any profit made on the assignment of a contract must be passed back to the seller.
In response, McLeod wrote to Clark, “On behalf of the more than 12,500 REALTORS® that we represent, I am writing to express concern at your decision to pre-empt the Real Estate Council’s independent advisory group’s review and introduce new rules on assignment agreements in real estate.
“We are concerned that the provincial government is looking to change the rules to fix a short-term problem. We understand the intention is to curb speculation associated with the high demand, low inventory market Greater Vancouver is currently experiencing. There are often unforeseen consequences associated with attempting to impose limitations on the market and we respectfully ask that the government consider the following issues.
“In other types of markets, assignments can protect sellers and buyers… Financial, family or other personal situations change. In such cases, assigning the contract to a second buyer allows both the original buyer to honour the contract and protects the developer/seller who would otherwise have a contract potentially in default.”
He was particularly scathing of the way in which local mainstream media has presented the issue of contract assignments, following the much-hyped Globe and Mail investigative article in February.
McLeod wrote, “The term ‘shadow flipping’ was coined to inflame public opinion. An assignment agreement is a regulated practice in BC.
“The media has not let facts get in the way of painting a negative picture of REALTORS® in this story of assignments. We have shared with them, but they do not report, that our organization has yet to receive a formal complaint from the public about assignments.
“We are concerned that the media hyperbole on this topic may lead to changes with unintended consequences once the market changes, as it inevitably does.”
He concluded, “The housing affordability debate in Metro Vancouver is at a fever pitch today. It’s become emotional and political. Amid this climate, it’s important to remember that market cycles come and go, but government intervention is permanent.
“We welcome opportunities to work with your government to find solutions that help protect the public irrespective of current market dynamics.”
Vancouver real estate agent Darlene Dunnett commented on the letter, “I agree that the media has run with the negative side of story of shadow flipping and in so doing had tarnished with one stroke the reputation of REALTORS® as a whole. It may be true that a certain number of agents and members of the public alike have taken advantage of uniformed sellers who may have allowed their home to be underpriced, and that is wrong. These people should be exposed and disciplined.
“The real estate council has jurisdiction over all REALTORS® and as such has an obligation to protect the public and to police and discipline their own members who deliberately seek to deceive the public and profit in their deception.”
Kathy Tomlinson, author of the Globe and Mail article that sparked the recent debate, was asked by REW.ca at a public housing affordability forum in February whether she believed the mainstream media in general had a responsibility to include balanced and contextual information in its stories, such as citing the total number of real estate transactions when highlighting an issue that exists in a small segment of the market. She said, “It’s not our job, frankly, to report on the corner where everything is fine. It’s our job to report on the corner where there is a car crash. It’s deeply ingrained in what we [as journalists] do and it’s not going to change. Nobody is going to assign me a story on what’s going well.”
Tomlinson added to REW.ca today, "I am an investigative reporter - so my job is to focus on, uncover and reveal problems that affect the public and hold the powers that be to account."