Shadow Flipping

[Migos]

Just when you thought Realtors couldn't get any more unethical...

'Shadow flipping' not limited to Vancouver real estate market
http://www.cbc.ca/news/canada/shadow-flipping-real-estate-1.3440824

An increasing number of real estate transactions in the Vancouver region feature what's called an "assignment clause," which allows the buyer to transfer or sell his or her interest in the property before the closing date.

Some savvy realtors use this clause to essentially sell the same house multiple times over, allowing them to make multiple commissions off of one house.

For instance, the realtor could find an investor (Buyer #1) willing to purchase the seller's home for $2.5 million. Buyer #2 then buys the contract for $2.8 million. Finally, Buyer #3 purchases the contract for $3.1 million.

At closing, Buyer #1 and Buyer #2 each make $300,000 in profit. The realtor earns three commissions, one for each transaction. The buyer only gets the original $2.5 million (less the commission on that amount).

The middlemen flippers pay income tax on their profits, but they pay no land-transfer taxes.

 

[James]

B.C.’s house-flipping practices setting off alarm bells in Ontario

http://www.theglobeandmail.com/repo...g-off-alarm-bells-in-ontario/article28711928/

 

[uto123]

Why would anyone want to buy an assignment at an inflated price from a flipper? Or is it that the buyer's don't know about this and it's only the Realtors that are in it for themselves?

 

[TOphotog]

Buyers of flips are very aware of what they're buying as all details are contained in the offer. Realtors really don't care if you buy a flip or a registered unit - the price is the price and the commission is what it is - there's absolutely NO benefit whatsoever to the realtor if you buy a flip, except that you might flip it later once the building's registered and you'd use them to list it.

You'd buy a flip at an "inflated" price because the value of the unconstructed unit has gone up and will continue to go up. If it's taking too long to register, some people need their money out and this is why they sell on assignment.

 

[Ronald A.]

There are also some houses in Toronto and other hot GTA markets where "insiders" buy then flip. Real estate agents are the most common flippers.

 

[rbt]

There are also some houses in Toronto and other hot GTA markets where "insiders" buy then flip. Real estate agents are the most common flippers.

Don't know about houses but many condos have a minimum sales requirement (often in the 4 to 10 unit range) within a certain tight time-frame to achieve a certain bonus commission level. This leads to many agents buying the units immediately, locking in the commission, then selling them at a later date usually very close to the original listing price.