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NDP MLA David Eby says a panel assembled to examine “shadow flipping” in Vancouver real estate risks failure if it does not have adequate investigatory and audit resources.

Rafal Gerszak/The Globe and Mail

A panel assembled to examine "shadow flipping" in Metro Vancouver's runaway real estate market risks failing to detect and prevent fraudulent activities by agents if it does not have adequate investigatory and audit resources, warns B.C.'s New Democrat housing critic.

David Eby outlined his concerns in a letter to Carolyn Rogers, chair of the independent advisory group and superintendent of real estate, saying that the resources of her office and the Real Estate Council of British Columbia (RECBC) are not sufficient. A shortage of auditors and investigators may have been to blame for the council failing to have investigated pro-actively in the past, Mr. Eby said.

"You will require a team of auditors and investigators to do this legwork on your behalf and for many reasons those staff members cannot come from the council or from the superintendent's office," he wrote, citing a hypothetical issue of personnel investigating themselves.

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In response to concerns about the soaring cost of home ownership, the province last week announced measures to collect more data on foreign ownership of local real estate. However, it left the council to examine the dubious practice of shadow flipping, threatening to impose a solution if it didn't act quickly.

The council announced its eight-member panel earlier this week. But Mr. Eby said despite its outside members, the council remains in the position of examining itself and that could prompt subordinates to be reluctant to provide information on the failures of their superiors.

"From my perspective, there is absolutely no credibility in pursuing this if the real estate council is essentially investigating itself," he said.

Shadow flipping, formally known as contract assigning, is the practice of arranging a property sale and then finding another buyer willing to pay more before the deal closes. A Globe and Mail investigation shone a light on the practice earlier this month and the self-regulating RECBC promised a review.

A new Angus Reid public opinion poll, to be released Friday, found two-thirds of respondents across Canada felt there should be more government regulation in the real estate sector, with the figure climbing to nearly three-quarters in B.C.

However, feelings were mixed on the contentious practice of shadow flipping: 33 per cent of respondents deemed it "entirely unacceptable," 32 per cent "generally unacceptable," 32 per cent "generally acceptable" and 3 per cent "entirely acceptable." Again, B.C. residents had the most hardened opinions, with 45 per cent of respondents deeming the practice "entirely unacceptable."

Mr. Eby said he is also concerned that there are not enough financial resources behind the council's investigation.

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"The superintendent has five different statutory responsibilities run out of a single office … and they've had no increase in their budget to handle a significant public-interest investigation."

He urged the panel to resist the demands of the Finance Minister for a quick turnaround, noting the issues "are entrenched, took years to develop and participants in fraud or predatory practices are often expert in concealing their activities." A final report is expected by the end of May.

Ms. Rogers said she is appreciative of Mr. Eby's letter, which has since been forwarded to the panel for consideration. However, she said she is confident at the moment that the group has a sufficient amount of time and resources.

"Make no mistake: If we think we need more time or resources to do the job right, we won't be shy to bring that up," she said.

Regarding the prospect of staff investigating themselves, the chair said the "right kind of people" are on the panel to give serious thought to the issue.

Ms. Rogers also responded to criticism that the real estate council is too complaints-driven, which potentially undermines the full scope of fraudulent activity by agents, conceding the balance can be tough.

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"You try to find that balance between not interfering where there isn't already a problem, but not wait until there's a problem to act. It's difficult. You meet a lot of resistance when you try to fix something pro-actively. … People will often say, 'If you don't have a consumer complaint, what you are doing is unnecessarily interfering in the market.'"

The panel is scheduled to meet next on March 9; terms of reference are expected to be made public around that time.

The Globe's investigation into shadow flipping raised questions about the practice's potential impact on the soaring housing market in B.C. The Angus Reid Institute poll noted that about half of people living in urban Canada feel that housing prices in their neighbourhoods are either "high" or "unreasonably high."

Of Canadian adults surveyed, 32 per cent described the price of a typical home in their communities as "unreasonably high," 23 per cent "high but understandable," 32 per cent "reasonable overall" and 5 per cent "a bit low." Respondents in Metro Vancouver were by far the most flustered, with 70 per cent of respondents picking "unreasonably high."

One online survey was conducted Feb. 2-10 among a randomized sample of 5,867 Canadian adults who were members of the Angus Reid Forum (ARF), with a margin of error of plus or minus 1.3 percentage points, 19 times out of 20. Another was conducted Feb. 15 among 1,513 ARF panelists, with a margin of error of plus or minus 2.5.

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