'Shadow flipping' can be avoided with trustworthy realtor, lawyer says
Assignment clauses can be avoided with purchase agreement
A real estate lawyer says the kerfuffle over shadow flipping really boils down to how much a seller trusts their realtor, because assignment clauses are perfectly legal.
Timothy Lack, a lawyer with Lunny Atmore, says it's up sellers to take steps to ensure that unscrupulous realtors don't use assignment clauses to jack up the price of homes they have dealings with, because once the buyer and seller have agreed to a price, there's very little recourse.
"Your sellers agreed on the price. They agreed on a completion date, and they agreed on lots of other terms, and they should be happy with their price," Lack told On The Coast guest host Gloria Macarenko.
"Quite often when they see an assignment, they think they've left money on the table because someone else has taken that contract and sold it for perhaps a higher amount to someone else."
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He says that for a prospective seller, it really comes down to how much they trust their realtor.
"A seller has to think: who is my realtor going to be? Is it someone that I know? Someone whose signs I see in my neighbourhood? Someone who's going to have lots of open houses and present my property to the market, so that I know I'm going to get the best possible price," he said.
Greed, laziness, stupidity
As a lawyer, Lack says he sees lots of people come to him with issues related to conveyancing, but they rarely come by to look at listing or purchase agreements.
]He says part of the problem is that the red-hot housing market adds pressure, especially for buyers who know there will be multiple offers above asking on most properties.
"I've noticed a level of aggressiveness in the last couple of years, especially on the part of sellers, who are saying to buyers, 'hey, if ... you've got too many subjects, I've got lots of buyers who will buy this property from me," he said.
But the housing market is a sword that cuts both ways, and sometimes sellers get blinded by the massive sums of money being offered for their homes and jump on big-money offers.
"So many people put themselves in a position, because their greed or their laziness or their stupidity forces them into an awkward position," he said.
'Duty' mean little
On Tuesday, Finance Minister Mike De Jong stopped to answer a few questions from reporters about how the province expects realtors to behave.
"Realtors are privileged to be part of a self-regulated profession," he said. "Our expectation is they will govern themselves and conduct themselves in a way that is respectful of that and respectful of their primary obligation — their duty to their client."
But Lack says whether or not a realtor feels duty to a client says nothing about their legal obligations, and most contracts are silent on the issue of assignment clauses.
"It doesn't say that you can assign, and it doesn't say that you can't assign," he said. "When the contract is silent, meaning it doesn't speak to the issue, it's generally assignable."
He says if sellers don't want assignment clauses to enter into the picture, they need to have a purchase agreement that reflects that. In fact, many condo developers do just this to avoid competing against "flippers" when they have unsold units in a building.
To hear the full interview, click the audio labelled: Mad your house was 'shadow flipped?' Should've got a better realtor, lawyer says