May 11, 2016 - 10:30 AM
VICTORIA - British Columbia's government moved Tuesday to protect property owners from predatory conduct in the real estate market by tightening rules on so-called contract flipping.
Finance Minister Mike de Jong said new regulations starting May 16 will require offers of sale to include two separate terms that deal with contract assignments in pending deals.
He said agents must include the consent of the seller to transfer the contract to another buyer and the rules spell out that profits from the transfer must go back to the original seller.
De Jong said the changes are designed to prevent situations where a buyer profits by selling a home at a higher price before the closing date of the original sale.
"The idea here, of course, is to better protect sellers in the real estate market and hopefully address in part some of the concerns that we've heard about on the conduct of some realtors in what has obviously been an active market," he said.
The average sale price of a single-detached home in Metro Vancouver was $1.4 million in April, a 30-per-cent increase from a year earlier, according to the Real Estate Board of Greater Vancouver.
Premier Christy Clark promised to rein in the contract-flipping practices earlier this spring.
She said "pure, naked greed" is driving real estate agents to flip a property multiple times at higher prices before a deal closes, allowing agents to continue making commissions while buyers avoid paying the property purchase tax.
De Jong said the government is not banning contract assignments, because they are required at times, but the aim is to ensure protection and transparency for sellers.
"When you are dealing with your most important asset, please, please, ensure you secure the advice of a professional," he said in a message to residents thinking about selling their homes.
The Real Estate Council of B.C., mandated to protect the public and enforce the Real Estate Services Act, said in a statement that de Jong's new regulations will help consumers make informed decisions about contract assignments before they accept an offer.
The council said it will alert all real estate licensees across the province about their obligations under the new regulations.
De Jong also said the government will amend property transfer tax forms to collect data about the citizenship and country of origin of people buying real estate in B.C.
De Jong said the data collection will start next month, but results aren't expected for at least six months.
"What I intend to do is aggregate the information and make it publicly available," he said.
De Jong acknowledged concerns have been raised that foreign investors have been fuelling the property market in Vancouver, but he wanted hard data, "not theories, not conjecture."
"We better have a clear sense of what the impact actually is on the market," he said.
A recent report from the School of Public Policy at Simon Fraser University said foreign Chinese buyers were mostly to blame for the over-heated real estate market. Josh Gordon's study also said the federal and provincial government's were doing little about it because they are benefiting financially.
De Jong said he was not in favour of a tax on foreign investment, fearing it sends the wrong message to the Asia Pacific investors B.C. has been courting for years.
Opposition New Democrat Leader John Horgan said the new regulations are a small move to protect sellers, but do nothing to improve affordability for people living in the Vancouver area.
News from © The Canadian Press, 2016