VANCOUVER (Reuters) - British Columbia pledged on Friday to crack down on real estate contract assignments - dubbed “shadow flipping” by local media - in a new effort to help cool down red hot housing markets, particularly in the Vancouver area.
Shadow flipping is where a party agrees to buy a property for a set price, but before the sale closes, they resell the contract to a third party for a higher price, taking the difference between the original and new selling price as profit.
The ruling Liberals said they would introduce new rules in the coming weeks to prevent the “potentially predatory” practice, undertaken by some real estate agents and purchasers.
“New provincial rules will prevent the abuse of assignment clauses by requiring the express consent of the seller and mandating that any profits from assignments are returned to the home-owner,” the province said in a statement.
Shadow flipping has been pointed to as one of many factors driving Vancouver’s runaway housing prices, particularly on the city’s desirable West Side, where the median selling price for detached homes hit C$3.4 million ($2.6 million) last month.
The price for a typical home in metro Vancouver, including condos and townhouses, hit an eye-watering C$795,500 in February, with sales volumes jumping 36.3 percent.
The province also pledged to work with the city of Vancouver on “collaborative steps” the two governments could take together to help boost housing affordability in the city.
The promises comes just days after hundreds of residents packed into a Vancouver community center to discuss factors behind the wild real estate market, including international capital flows - particularly from Asia - local real estate practices and speculation.
Reporting by Julie Gordon, editing by G Crosse