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B.C. Announces New Rules To Curb Shadow Flipping

Shadow flipping brought a lot of negative light to metro Vancouver’s real estate industry earlier this year, which has now led to the province announcing new rules in an effort to curb the shady practice.

As of May 16, 2016, only the seller of a home will earn profit from a real estate contract assignment.

According to B.C. Finance Minister Mike de Jong, contract assignments will allow a person to assign their part in a contract of purchase or sale to someone else. This essentially cuts out the middle man.

In ‘shadow flipping’, a couple real estate agents allegedly added notes to assignment contracts without the seller knowing, and resold a home multiple times for a higher price without the seller’s knowledge.

Jong adds that under the new rules, realtors will now be required to draft two separate terms, one that requires the seller’s consent to transfer the contract, and one that requires any resulting profit to be returned to the seller. If potential buyers want to lift those terms, the licensee will be required to notify the seller. The seller will also be notified to seek professional advice.

The province has also revealed new property tax forms to collect information about the role of foreign capital gain in British Columbia’s sizzling market.

The forms will be used to collect “hard data”, which includes the nationality of the buyer, and where they reside if they are non-Canadian citizens. If real estate is being purchased by Corporations, they will be required to disclose the citizenship of non-Canadian directors.

The province will share the collected hard data with the Canada Revenue Agency.

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