Buyer beware: 'Shadow flipping' exposes weakness in real estate regulation

I'll never forget the moment we fired our first realtor.

It was an experience not unlike a really awkward breakup. And after a relationship that began with so much promise.

He and his wife liked all the same things we did — what a coincidence! He showed us pictures of his annual clients' party, in one of which he appeared to be dressed as a gladiator.

And then, as the weeks turned into months, and his ratio of work to commission started narrowing, something changed.

He tried to convince us to put an offer on a house next to a trucking route. Then he tried to sell us on a Yaletown condo that was essentially the antithesis of just about everything we wanted in a home. And then he was rude to my wife.

Not designed for consumer protection?

We ultimately found another, fantastic realtor, bought a house after nine months of searching and — from a property perspective anyway — lived happily ever after.

But that experience has never left me: the uneasy, sinking realization that the person you've chosen to shepherd you through the biggest purchase of your life may not actually be on your side.

That was more than a decade ago. In the time since, house prices in the Lower Mainland have quadrupled, the number of realtors in B.C. has gone up more than 40 per cent. But how much better protected are home buyers?

News of so-called 'shadow flipping' has exposed more than greedy realtors anxious to milk a red-hot market; critics say the scandal has also shone a light on the inability of B.C.'s real estate regulator to properly police the booming industry.

"It's ineffective. The organization is not designed as a consumer protection organization," says real estate blogger and investment advisor Garth Turner.

"It is basically an industry trade organization that's been given self-regulatory organization duties. But who's policing the Real Estate Council of B.C.? Nobody."

'We're satisfied that we are doing a good job'

In an era when the public can go online to rate doctors and teachers, the RECBC's website is about as good as it gets for information on your realtor's disciplinary history.

The site details all fines and suspensions dealt to realtors since 2004. But navigating a discipline page that's essentially a long list of highlighted blue names can be difficult.

And as of now, there's no function to link a discipline decision directly to a search of a licensee's name.

Council deputy executive officer Larry Buttress says that's about to change. But he rejectsTurner's basic criticism.

"I think it's certainly fair to say that not everybody is happy with our penalties," he says.

"But I think when we look at the number of penalties that we mete out, we're satisfied that we are doing a good job in relation to these discipline matters, and we're always trying to improve in that."

Who benefits from consent agreements?

Over the years, B.C. realtors have been punished for everything from fraud to flipping homes, to taking advantage of mentally ill clients.

But from a public perspective, the process can be disappointing. The vast majority of disciplinary proceedings end up in consent agreements, which essentially amount to plea deals for licensees.

According to the RECBC's last annual report, there were 88 consent agreements in 2014/2015.

And only one hearing.

In some of the cases I've covered, complainants have said the decision to resolve the case with a consent order has left them feeling excluded from a process in which a realtor agrees to a set of facts far less damning than the ones they experienced.

From Turner's point of view, it's a case of a trade organization acting to keep rogue elements of the industry under control with a minimum amount of bad publicity, as opposed to avenging consumers. 

Both the length of suspensions and the amount of fines have been increasing. But the maximum amount the council can fine a realtor is $10,000. Or 'peanuts' as we call it in Vancouver housing circles.

The RECBC has asked government for an amendment to legislation that would raise maximum fines to $50,000. They've been told it's under consideration.

A more proactive role?

Buttress says the public needs to understand what the council is — and is not.

"Quite often complainants are looking for some type of financial restitution. We don't have that authority," he says. 

"They're looking for issues that can only be resolved civilly. Our mandate is limited to the investigation of a real estate licensee's conduct and whether that conduct has met the professional standards that we set."

The RECBC acts according to complaints from the public. This week, they asked for people with specific concerns about 'shadow flipping' to come forward.

But the issue suggests a more proactive approach may be needed. Actively looking for bad behaviour before it becomes a problem, as opposed to waiting for the results to land in your lap.

Realty tends to be a word of mouth business, after all. That's how we ultimately found the professional who helped us buy a home.

A frenzied market like the Lower Mainland is rife with rumours about good and bad realtors.

All you have to do is listen.