Metro explores the latest trends emerging on the West Coast of Canada.
Cafe Politics: Blame demand, not shadow flipping for Vancouver’s high housing prices
Real estate lawyer Timothy Lack says he doesn't believe assignment clauses are responsible for driving up Vancouver's real estate prices.
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A Vancouver real estate lawyer says concerns over so-called shadow flipping driving the cost up of housing in Vancouver are overblown.
Timothy Lack, a lawyer with Lunny Atmore, said he doesn’t believe the controversial practice is responsible for Vancouver’s high housing prices. Rather, he believes a combination of high demand and short supply in the city’s already red-hot real estate market is to blame.
“There are some cash-rich people in this city, or who are coming to this city, who are willing to pay great prices for our real estate,” Lack told Metro. “This little flip thing is not driving up (the cost of real estate). The fact that there’s someone willing to pay so much money for our real estate is what’s driving it up.”
His comments come a week after British Columbia's housing industry was jolted by allegations uncovered in a Globe and Mail investigation that some Metro Vancouver real estate agents are allegedly taking part in shadow flipping. The practice involves brokers reselling a property multiple times before a deal closes. As a result, the final price rises by hundreds of thousands and the agent profits by collecting commission on each sale.
Only the final buyer pays the property transfer tax, meaning B.C. is potentially losing out on millions in tax revenue.
Following the allegations, the Real Estate Council of B.C. said it is appointing an independent advisory group to probe the allegations.
B.C. Premier Christy Clark also said she expects the real estate industry to act on the allegations.
“We're giving them the chance to fix it. if they don't, we're going to fix it for them,” she told reporters Tuesday in Victoria. “I don't have a lot of patience on this issue.”
But real estate lawyer Lack said he thinks the controversy is exaggerated and that people shouldn’t be so quick to portray shadow flipping as the “villain” in Vancouver’s pricey housing market.
Lack said it's not new or surprising that people are profiting from assigning clauses.
He said he has had clients as recently as two weeks ago who believed they might have been victims of the practice.
“I don’t know why people are so upset,” he said. “If you’re selling your house for a price that you’re happy to get, and then someone turns around and flips it, then they found a buyer that your realtor should have found.”
Since most contracts are “silent” on the issue of assignment clauses, he said the practice of assigning is entirely legal.
Lack said it’s up to sellers to guard themselves against an “unscrupulous realtor” who might use the practice to jack up the price of a home.
“If a contract doesn’t address the issue of assignment, then it’s assignable,” he said. “But if a realtor is complicit or somehow breaking the rules in the flip, they should be taken to task by the seller.”
He urged sellers to do their homework and select a realtor that is experienced, trustworthy and familiar with their neighbourhood before putting their house on the market.
“People break rules all the time in professions, and it’s hard to protect yourself against that,” he said. “Your best way of not being a person who watches their property being flipped is to already be the person who has sold it at the best possible price.”
With files from The Canadian Press.