British Columbia·Analysis

B.C. real estate: Can the public trust industry to govern itself?

A group tasked with reviewing the regulation of B.C.'s real estate industry says public confidence in the sector "has been shaken". Has the time come to do away with self-regulation?

Critics say tougher rules won't restore public confidence in B.C.'s real estate regulation

A task force probing the B.C. real estate sector says it is considering whether or not self-regulation is adequate to police the industry. (Darren Calabrese/Canadian Press)

Sometimes, real estate in B.C. feels more like the plot of an overloaded thriller than a regulated industry.

Shadow flipping, predatory pricing, conflicts of interest: every day brings a new tale of realtor greed and depravity in a gold-plated market. Throw in some Lamborghinis and a few preening models and you've got ... oh, that's right, Vancouver.

There is a dedicated cop in this story, of course: the Real Estate Council of B.C. But the slow drip of bad news stories has inevitably raised questions about the organization's ability to handle the job.

In its interim report this week, an advisory group aimed at overhauling regulation of the industry says public confidence in the sector "has been shaken" by the barrage of revelations.

Carolyn Rogers, B.C.'s superintendent of real estate, chairs the group.

She says the task force needs to consider whether self-regulation is adequate to police a multi-billion dollar industry mired in scandal. 

The question for many: how can it be?

'Entirely reactive policing'

David Eby, an NDP MLA who has been a vocal critic of the existing regulatory regime, says he thinks Rogers' 'Independent Advisory Group' has come up with a number of praiseworthy suggestions.

But he says the very nature of the probe — a council-initiated group that considers submissions from stakeholders and the public, as opposed to a government-run audit-style inquiry — underscores a bigger problem.

According to the interim report, the group has met twice since releasing its terms of reference to the public.

The real estate council's advisory group will present a final report with recommendations to clean up the industry by the end of May. (RECBC)

They've spoken with real estate council staff, who identified gaps in regulation and proposed solutions for tackling issues ranging from contract assignment and conflict of interest to money laundering.

But as Eby points out, the practices which led to the creation of the task force in the first place were raised by the media, not the regulator.

The Globe and Mail first revealed the practice of "shadow-flipping", where realtors earn multiple commissions off the sale of the same house. Those reports led the province to promise a crackdown.

This week, the same paper alleged violations of real estate regulations by New Coast Realty. The council then scrambled to issue licence conditions.

"It's an entirely reactive policing of the industry," Eby says.

"And as long as its reactive, they'll always be one step behind the fraud artists."

Common sense suggestions

For its part, the real estate council says it has taken measures to beef up enforcement and looks forward to implementing the advisory group's recommendations.

Those suggestions will hit home within anyone who has bought or sold a house in B.C. in recent years.

For a start, Rogers says most people think the council's fines are too low. A maximum of $10,000 is seen as the cost of doing business in a market where a million dollar home is considered a bargain.

And she says it's hard to comprehend how a double-ended deal which sees one realtor represent both buyer and seller is good for anyone but the agent in the middle of the contract.

It's hard to imagine the province not acting on those two recommendations, but why has it taken a crisis for either to become reality?

The housing market has been supercharged for years; whether the price is $100,000 or $1 million, the potential for conflict of interest inherent in a double-ender is obvious to anyone who has been asked to agree to dual agency.

But it's the kind of form people sign for fear they'll miss out on a deal; the same anxiety which makes buyers put 'no-conditions' offers way over asking price on homes worth a decades-worth of wages.

How can it possibly be in the best interest of a consumer to purchase a house without knowing the least thing about what's actually inside it?

More 'consumer education' necessary?

The task force is seeking public input. Rogers says more "consumer education" is necessary.

But when it comes to continued self-regulation, many people who have gone to the council already feel the experience was an education enough.

The bulk of complaints are settled in consent orders, which include a statement of facts agreed to between the realtor and the council along with a list of sanctions.

Complainants I've managed to track down have felt left out of the process, faced at the end of the day with a description of events bearing little resemblance to what they actually endured and a deal which minimizes wrongdoing on behalf of the realtor.

B.C. Premier Christy Clark promised to crack down on 'shadow flipping' after revelations of wrongdoing hit the media. (Rafferty Baker/CBC)

The council offers no financial restitution, meaning the only chance of getting some form of payback is through an expensive and lengthy court process.

Even so, realtors have admitted to serious wrongdoing involving lies and forging client names on documents; at what point should the police get involved, as opposed to a self-regulating industry body?

Looking after number one?

The province has taken away self-regulatory power from another group in the past: teachers.

In 2012, the government replaced the old B.C. College of Teachers with the Teacher Regulation Branch after a report which described the old college as "dysfunctional".

The report, written by lawyer and former public servant Don Avison, concluded the teachers' union exerted too much influence over the college's regulatory activities.

Avison found a proper balance didn't exist between the public interest and the interest of members. He also said the college itself was not viewed as "an independent and credible entity."

Sound familiar?

Of course those were teachers, hardly a favourite group of the provincial government's. The real estate industry, on the other hand, drives the economy.

One looks after your children, the other after your house. Should either be trusted to look after themselves?

ABOUT THE AUTHOR

Jason Proctor

@proctor_jason

Jason Proctor is a reporter in British Columbia for CBC News and has covered the B.C. courts and mental health issues in the justice system extensively.

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