I recently heard that one of our friends and associate, Janet Rathbun, had distributed a flyer with the caution to beware of the unsolicited door knocker offering to purchase an owner’s home for cash. This caused me to reflect on what is currently happening in the Greater Vancouver market area, and what its causes and repercussions might be.
One of the tried and true methods of building a business is to go to the grass roots and connect directly with consumers. Historically, the door-to-door sales technique has been used by many different types of business. This technique is when a salesperson walks from the door of one house to the door of another trying to sell a product or service to the general public. While the older model of the salesman carrying a bag of goods on his shoulder to sell to the public still survives, this practice has seen a decline in recent years. In the USA, the Green River Ordinance which prohibited door to door solicitation was upheld in 1933.
As of 2008 the business model of many companies that participate in this type of direct marketing has changed with the growth of the Information Age. Products sold door-to-door are now more likely to be more subtle in nature: such as sheets of coupons to events or local businesses, season tickets to local professional sports teams, surveys, or subscriptions to home television and broadband internet services.
The issue that confronts home owners today in the Greater Vancouver market is a new variation on the door to door salesman of the past. Today the knock on the door could be that of a “Buyer” canvassing a neighbourhood offering to purchase homes directly from the owner for “cash”. The issue with this practise is that the door knockers are not revealing that they may be unlicensed wholesale agents for developers or foreign investors, looking to earn income from flipping the purchase contract. As unlicensed wholesalers, these individuals are not bound by the rules and regulations that REALTORS are. The consumer has no inherent protection from these canvassers, and these individuals are not accountable for their statements or actions outside of the costly and time consuming legal process. Unlicensed wholesaling is an illicit and predatory business, and it is quickly growing in the Lower Mainland.
A recent article described a “wholesale agent’s” job. This individual would approach homeowners and make unsolicited offers for private cash deals. She made a 10-per-cent fee on each purchase by immediately assigning the contract to a background investor. Unlicensed wholesaling is completely unregulated. It is estimated that hundreds of wholesalers are scouring Metro Vancouver’s never-hotter speculative market.
Because wholesalers are unlicensed, they have no obligation to identify their background investors or reveal the source of funds to Canadian authorities who fight money laundering. REALTORS on the other hand have a legal obligation to have their Clients complete FINTRAC documentation as well as documents providing full disclosure of agency relationships and remuneration.
The investor behind the unlicensed wholesale agent targets a block, often with older homes, and may even give the wholesaler cash in a legal trust. The wholesaler then begins their door to door canvassing, persuades a homeowner to sell, offering immediate cash, no subjects, no home inspections, and savings on REALTOR fees.
While the wholesaler claims to represent one buyer, or in some cases to be the buyer, often there are three or four contract flippers often already lined up. This shell game of flipping the contract is attractive to any investor looking to launder illegal funds from underworld activities or terrorist related funding.
While it is illegal for wholesalers to privately buy and sell property for investors without a licence, the door to door approach is preying on elderly home owners, or those who are seduced by the lure of a quick cash sale. The underlying problem in all of this is that many home owners could be scammed or pulled into a transaction that may be funding illegal activities. The practice also hurts the Real Estate Market as a whole because it has the potential of inflating the values in certain neighbourhoods artificially, leading to the potential of a severe market correction in the future.
When you get that knock on the door, or find a flyer on your windshield, consider who the canvasser is working for. Is that person looking out for your best interests? Or the interests of a concealed third party. Remember that even a REALTOR working for a Buyer Client is not bound to serving a Seller’s best interests.
The best solution to dealing with this growing trend is to call your favourite REALTOR. Who is the agent that helped you find your home? Do you have someone that you have known and trusted in the past to help you with your Real Estate needs? Keep a stack of their cards on hand, and advise the door knocker to call them as your agent. This way, you will have a buffer against the potential of harm. As licensed professionals, REALTORS have a fiduciary responsibility to represent your best interests, and to ensure that any transaction protects the Clients with full disclosure and legal requirements.
Members of the board Laura June and I belong to, the Fraser Valley Real Estate Board, also abide by the Rules of Cooperation, a common set of rules agreed to by the three real estate Boards operating in the Lower Mainland of BC. These rules are a model of cooperation and ensure consistency of service across our geographic boundaries.
In addition to the commitment to ethics and professionalism, the board members abide by the legal regulations set out by the Province of British Columbia. Any violations to our Code, Standards, Rules, or legislation are brought forward for investigation and disciplinary action at both the Board level and at the provincial level, through the Real Estate Council of BC.
Your best protection from scams and money laundering schemes, is to call Laura or I when you hear that knock on your door. You can also give us a call at any time and we can deliver a supply of business cards for you to hand the door knocker with the advice to call us as your representative.