British Columbia's Superintendent of Real Estate and its Independent Advisory Group (IAG) recently released their report to the public "on conduct and practices in the real estate industry in British Columbia." It is a remarkable document. The outgoing superintendent, Carolyn Rogers, and her fellow IAG appointees are to be commended for a report that is both comprehensive and concise. The superintendent's willingness to grade themselves an "F" on how real estate has been governed on their watch is commendable. The many skilled and conscientious real estate professionals believe such a report has been long overdue.
Whether intended or not, this report is a clinical forensic examination of just how poorly trained, monitored and governed our real estate practitioners are. The report reveals a systemic failure of ethics and standards and a culture too focused on fees – not service. The report is also, by extension, a condemnation of the provincial government. Politicians consistently weakened the safeguards between the industry and consumer, needlessly granting realtors the right to self-regulate in 2005, right on the eve of the 2007-08 global meltdown of housing markets.
To understand why successive Liberal governments acted so carelessly, one has to focus on the incestuous relationship between the real estate and development industry and career politicians in this province. This connection has fuelled the real estate affordability crisis that is transforming British Columbia.
The real estate industry is facing a crisis of confidence they cannot recover from. The public (voters) have ingrained negative opinions of both realtors and politicians, and the too-obvious links between them. Realtors and politicians act only when they perceive it to be in their best interest. Action today means saying you "hear and care" and then commissioning a study.
This report was released only 15 weeks after the committee was struck in "response to concerns about real estate licensee conduct reported by the media." The only way such a quick yet thorough review could have been completed is because these issues have been known and percolating for some time – yet played down by self-interests. This report acknowledges that far too many of the province's 22,000 realtors entrusted to advise the public on their costliest and most important purchase are not up to this task and not qualified to govern their own affairs.
The report makes 28 recommendations, divided into four subsections: Transparency and Ethics; Compliance and Consequences; Governments and Structure; and Licensee and Public Education. The rationale behind the proposed action plan for all of the recommendations is shockingly obvious and damning. Too many realtors do not discharge their duties with skill, competence and in an ethical manner. The licensing system is inadequate. Discipline and fines under self-regulation are a joke. The industry permitted dual agency (in which the same agent acts for both buyer and seller), shadow flipping (in which a property is flipped to a third party for more than the seller received for it) and other blatant conflicts of interest. Commissions drive the industry just as various real estate taxes drive government policy and campaign contributions influence politicians. As long as those commissions, taxes and donations rise in conjunction with real estate prices, realtors and politicians are in perpetual conflicts of interest.
So, why did the province's 11 real estate boards and the provincial government immediately accept this report and its 28 recommendations? The simple answer is that they are scared for their livelihoods. But just like the province's 11 real estate boards' current plan to merge into one board and to have more public representation in its governance, none of these efforts will address the individual conduct and performance of members and firms who are trying to perpetuate sunset practices in an industry.
As for the Premier and the provincial government, who cited the report as they announced an end to self-regulation within the real estate industry, they naively did not foresee the mounting cynicism and anger that has propelled real estate and housing affordability forward as the key issue in next May's election. Instead, they continue to depend on the advice and selective statistics from the very industry and condominium salespeople who have fuelled this crisis.
Furthermore, they have miscalculated the electoral appeal of a homeowner who on paper sees the value of their home skyrocket. Such owners know their actual buying power is neutralized if they stay in this market because all values have risen. The fall in the Canadian dollar in conjunction with rising personal debt has further reduced paper wealth. These homeowners worry greatly about the housing market now left to their children and what this will ultimately cost them.
Therefore, if you believe the industry and the government's position that only a "very small per cent" of realtors and firms are involved in questionable or lax service, you will also believe that foreign purchasers make up "less than 5 per cent of our market." And, if you believe this, you will also believe that an industry and government which needlessly allowed and fuelled this mess can now be trusted to clean it up.
William McCarthy has held a British Columbia Provincial Real Estate Licence since 1987. He also has six university degrees and 10 professional designations. He is a past president of the Real Estate Institute of Canada.