A friend of mine asked me the other day what I felt about the recent headline phrase that keeps popping up: SHADOW-FLIPPING. Until recently, this was not a phrase kicked around the office, this was a buzzword created by the media. Until recently, this was only called assigning contracts. This has only become a problem recently as the market in the Greater Vancouver has been snowballing into an avalanche. What happens is, an agent representing the seller finds a buyer and follows through with a contract of purchase and sale. Now, before that contract even has a chance to complete, the agent finds another buyer for say, $300,000 more than the original sale price. The agent then "assigns" the unfinished contract to the new buyer for the new price, collecting a second commission on the same sale. This can go on for as many times as the agent can find a new buyer, for a new price. At face value, this just seems like the agent came across a new buyer who's willing to shell out the extra cash for the desired property. The seller will get a profit, the new buyer will get the home, everybody wins...except for the government who misses out on the transfer tax. But, the "shadiness" lies in how this was handled. IF said agent had these 3 buyers lined up from the start and was playing them off each other and the seller, this is unethical.
Christy Clark is moving forward with requirements to disclose everything to the original seller and furthermore, any following profits would go to said seller. Take away the opportunity for profit and you will see said "shadiness" disappear. Assignments are okay as long as your agent is getting you the best bang for your buck from day one. IF said agent had 3 buyers lined up and gets their seller the best option with the best price right away, they are doing their job properly. Only THEN would it be okay if the agent THEN runs into another buyer with a better price and assigns the contract. The key is to deter a listing agent from not getting their seller the best price upfront and milking multiple sales unethically. If Christy and the Real Estate Council can enforce this and perhaps a transfer fee for certain assignments and maybe a reduction in commission for "flipping", this epidemic will be a thing of the past. The bottom line is, agents who represent the buyer AND the seller must walk the fine line of looking out for the best interests of both parties, or they are only servicing themselves.
Photo below care of The Globe and Mail: