The Vancouver real-estate market is like a huge, berserk, anything-goes house party. It’s spilled out on to the street and neighbours are standing around watching it, but the cops still haven’t shown up.
On Tuesday, the first authorities finally arrived on the scene — an independent advisory group that was thrown together when the situation got so outrageous, even the most ardent proponents of hands-off government realized something had to be done.
And the first thing it did was rap the waiters — for serving too many people at the same time and sampling the punch bowl themselves.
But just six pages in to a critical report of how the real-estate industry has conducted itself through this extended Mardi Gras, even the independent council admitted nothing it is recommending will bring the party under control.
“It is important to understand that the recommendations in this report … are unlikely to have a material effect on housing prices … Price is determined by the factors of high demand and limited supply… Ensuring people buying and selling homes are fairly treated is critical to public confidence, but it does not affect housing supply and demand.”
The advisory group was struck in February after a Globe and Mail expose about shadow-flipping, where real-estate agents were taking contracts and reselling them at higher prices before the closing date, often without the vendors’ knowledge, and for their own benefit.
That scam was curbed, but it led to intense suspicion about real-estate licensees failing to disclose important details and putting their own interests ahead of those of their clients. There are also concerns about anti-money-laundering-law compliance and colluding with clients to avoid those reporting requirements.
That led to suggestions that the regulatory oversight of real-estate agents is too passive and doesn’t intervene enough to protect people. The industry’s mostly self-regulated oversight lacks investigative and enforcement abilities, interprets its jurisdiction too narrowly and is inaccessible to the public.
There’s nothing in Tuesday’s report that disputes those findings and several points that actually support them.
“Alleged misconduct, combined with the perception that the Real Estate Council is unable or unwilling to take strong action to address it, has resulted in a loss of public trust,” says the report.
Finance Minister Mike de Jong called it a troubling picture. Premier Christy Clark will announce new measures to protect consumers today. That suggests all or most of the group’s 28 recommendations will be implemented by the government.
The industry was given self-regulatory status in 2005, and the makeup of the council that is supposed to oversee the industry’s conduct speaks volumes. Thirteen members of the council are real-estate licensees, elected by fellow licensees. Three are members of the public.
It has handled between 413 and 538 complaints in each of the past three years, and managed a total of seven disciplinary hearings over that time and a dozen qualification hearings.
The report said the council needs much more transparency and a more sustained focus on ethics. The council has a lot of principles and rules, but doesn’t use them. It interprets its jurisdiction narrowly and appears reluctant to intervene.
It found the industry is lacking a culture of holding everyone to higher standards, and more needs to be done to encourage licensees to report misconduct. More proactive investigation is needed and much higher fines are needed for wrongdoing.
The overlap between local real-estate boards and the council, where boards are handling some complaints and discipline, is undermining the public interest because of confusion and contradictions. They should leave it all to the council, the report said. There is similar confusion between the council and the superintendent of real estate, who is a provincial bureaucrat with limited budget and authority.
It recommends an end to dual-agency deals, where an agent acts for both buyer and seller and contracts out some of their obligations. Those are a significant source of conflicts of interest, it said.
It also wants to see easy access to whistleblower programs where anyone can report perceived misconduct.
