Case Study Shows Realtor Ethics Penalties Too Light
Photo: Flickr / Pamela Carls
A new case study regarding the conduct of a Vancouver-based real estate agent has shown that the recent discussions about the inability of current regulations to actually prevent both individual real estate agents as well as brokerage forms from engaging in unethical and potentially illegal behaviour have a lot of merit. A local news story in Vancouver has emerged detailing the unethical efforts of a real estate agent in obtaining huge profits while only getting what has been effectively a mere slap on the wrist when discovered by the authorities.
In this instance, the realtor under investigation was able to make a profit of $400,000 through the practice of what is known as shadow flipping. This term refers to a practice within the real estate industry where a realtor repeatedly reassigns a contract to sell a property to multiple sellers before the initial sales contract actually closes, allowing them to obtain a large amount of profit through multiple commissions charged on each shift of the sales contract. This is exactly what one local realtor did, and in return for his unethical behaviour he was given a penalty of merely $8,000. Additionally, despite being caught and fined for his actions, the realtor was able to commit the exact same sort of sales tactic just a few days later, highlighting the lack of oversight by the regulatory body to monitor agents who have been convicted of ethics violations.
Certainly, this sort of examples adds more
examples for critics who argue that the current regulatory regime in regards to
ethics penalties and enforcement is much too lenient against rule-breakers.
Even though this particular instance of rule breaking occurred in British
Columbia, various real estate regulatory bodies have acknowledged that this is
an issue all over the country. The Ontario Real Estate Association has come
forward with a proposal that argued for effectively doubling the current maximum
fines from fifty thousand dollars to $100,000 for brokerages found guilty of
ethics violations, and a new maximum of $50,000 for individuals. In addition, not
only has the organization has criticized the current punishment precedents for
being lacklustre compared to the offenses, it has also argued that the financial
penalties were out of date given that they were last updated more than fifteen
years ago. They have also suggested that
new penalties should force individuals convicted of ethics violations to
forfeit all of the profits they have obtained under such practices.
Published Date: Oct 02 2017