The head of the greater Vancouver area’s real estate board says he expects member realtors to disclose to sellers whether they plan to flip properties to other buyers before the closing of the deal.
And disclosure isn’t just an expectation – it’s the rules.
“We expect people to follow the rules and protect the interests of the public,” Darcy McLeod, head of the Real Estate Board of Greater Vancouver said in an interview with Global News.
“They’re required to disclose that they’re purchasing it for their own use. And if they’re going to resell it, they’re also required to disclose that and disclose what the expected profit would be,” he said.
Provincial authorities in British Columbia have opened in recent days an investigation into the use of so-called assignment clauses following claims the arcane condition is being improperly exploited by some to generate fast profits, while substantially inflating home prices in the region.
WATCH: Concerns are being raised about an investigation into alleged shady practices in Vancouver’s red hot real estate market. As John Hua reports, there are fears nothing will be resolved unless an independent body is involved.
Properly disclosed assignment clauses are “common” and have been for a long time, the realtor association president said.
“Where they become problematic and people start asking more questions is when the market is hot and property values are changing at two or more per cent per month,” McLeod said.
To say home prices in Vancouver are hot is a significant understatement, experts say, with benchmark property values skyrocketing 22.9 per cent in January.
“Hot doesn’t quite describe Vancouver’s three-alarm fire of a housing market,” Bank of Montreal chief economist Doug Porter said.
With values increasing that quickly, a home can climb by tens of thousands of dollars — or more — between the date an agreement is struck with a seller and the final closing date months later.
“It makes it attractive for investors or profit takers to try to get in and out of the market quickly,” McLeod said.
The B.C. government said this week it plans to examine real estate industry practices as well as whether or not regulatory oversight currently in place is doing its job.
McLeod said he didn’t believe many realtors and or investors were gaming assignment clauses to drive up home values.
There may be outlier cases, but the provincial investigation should stamp out such instances, he said. “Maybe this is when it will be caught if this is happening.”