‘Shadow-flipping’ realtors in Vancouver’s red-hot market face misconduct investigation

The government of the British Columbia in western Canada has announced an investigation into allegations of fraud and insider trading among Vancouver realtors.

The probe, to be jointly conducted by the industry’s Real Estate Council of BC (RECBC) and the province’s Superintendent of Real Estate, comes amid allegations that Vancouver’s soaring property market is being skewed by so-called “shadow flipping”, often involving Chinese money at the end of a chain of buyers.

A report on the phenomenon in the Globe and Mail newspaper on Saturday described how properties are being sold with extremely long closing periods; before a sale finalised, the contract is assigned to a succession of other buyers at increasingly high amounts. Because the property only technically changes ownership once at the end of the chain, only one payment of transfer tax is made.

The report described huge profits, with realtors in some cases acting as middle-man buyers themselves. Some initial sellers said they felt misled by realtors who went on to sell contracts for much more than they had said the property was worth. Most of the cases and depictions of the phenomenon by industry insiders described Chinese or foreign-funded end buyers.

Provincial MP David Eby, housing critic for the opposition New Democratic Party, on Monday called for an investigation into the practice. He also highlighted the alleged use of false addresses on financial disclosure forms to obscure foreign money of unknown origins being used to fund purchases.

Hours later, the province’s Liberal government of Premier Christy Clark announced the probe.