The Media in British Columbia have been having a field day with the Real Estate Industry recently. The hot market conditions on the West Coast have been prime for a lot of emotional rhetoric from disappointed Buyers trying to enter the market. Of course the prospect of increasing profits have allowed many Sellers the benefit of capitalizing on the frenzy. For the Real Estate pracitioner it has become a "no win" scenario. On one side, the agent who is representing the Seller is bound by their agency agreement to follow the Seller's lawful direction, including how, when, and why to sell. Frustrated Buyers on the other end of the equation then are focusing their anger and frustration on the Seller's representative, who is obligated to the Seller's best interests above all else.
In response to the highly emotionally charged environment, the BC government has seized the opportunity to create the optics of taking control. Their first action was to close a loophole in contract assignment. The notion of "flipping" a property is not new, nor is contract assignment. The media coined phrase of "shadow flipping" has been a reality in a quickly escalating market for as long as real estate contracts have existed. When the value of a property increases so quickly that the paper it was written becomes a commodity itself, the ability to sell the paper exists. The practice only works in an over-heated market...and only when the signed contract becomes valuable in and of itself. The government's recent change in the law was self-serving in that the only thing it will accomplish is a opportunity for increased property transfer taxes on those who seek to flip properties.
The BC Real Estate Industry will soon have a Government appointed Superintendent. This individual will have the mandate to oversee the operations of the former Real Estate Council. An independent advisory group recently created a document suggesting 28 changes to the way Real Estate functions in BC. The Government has agree to act on all 28 of the recommendations. Several of the changes will have a significant impact on the way business is done. One change that will certainly reverberate throughout the industry is the notion that "double-ending" of contracts will be illegal for licensees.
The law of Agency is an area that is full of grey areas and misunderstanding both within and outside of the Real Estate Industry. The basic concept is that the Agent for a Client must place the interests of the Client ahead of his own, and follow the lawful direction of the Client. Often the consumer mistakenly believes that by dealing with a Listing Agent directly, rather than having their own Agent is an advantage to them. This is an unfortunate misconception. Often a Buyer shares information with a Listing Agent that reveals their bargaining position, or motivation. The Listing Agent is then bound by the laws of agency to share that confidential information with his Client.
In order to help remedy the potential conflict of interest in working with both a Buyer and a Seller, the industry created the concept of "limited" Dual Agency. In this scenario, the Agent pulls back from his responsibility to the Seller and represents both parties in the transaction in a lesser fashion than what the law of Agency requires.
The ideal scenario in a real estate transaction is for each side to have someone on their side. The Buyer's Agent will work with the Buyer to negotiate their best terms, and the Seller's Agent will represent the best interests of the Seller. When there is a willing Buyer and Seller, the process will work smoothly into a mutually acceptable conclusion. The days of a consumer seeking to self-represent themselves in the hope of gaining an advantage in the negotiation process are gone. Agents are in an ever increasing legal position to demonstrate that they placed their Clients interests ahead of their own in all aspects of the complex world of Real Estate.
The question that remains for the consumer to answer is: Who is on your side?