Contract assignment in real estate

A recent Globe and Mail article described a practice of contract assignment that they’ve dubbed “shadow flipping”.

A recent Globe and Mail article described a practice of contract assignment that they’ve dubbed “shadow flipping”. Shadow flipping, as they described it, is when a Realtor buys a house from a seller and then, before the transaction closes (that is the buyer pays for the house and the seller gives the buyer possession), they resell the contract for more money, profiting at each assignment. The Realtor presumably knows the house is worth more than what they paid for it or knows that it will increase in value before the transaction completes. Either way, they are using their expertise in the industry to take advantage of someone.

All the Realtors I’ve spoken with about this are outraged. We spend our time ensuring our clients are represented and protected from just such behaviour. If an agent is acting outside of their obligations to their clients, then this is a grave breach of their duty and not acceptable on any level.

As Realtors, we work within a relationship called agency. The agency relationship brings a lot of responsibility with it. When you’re buying or selling a home, there are lots of technicalities and everyone in this situation deserves to have someone working for them and representing their best interest, and that’s what the agency relationship entails.

Contract assignment is nothing new and it’s a practice that will continue, but when that practice involves taking advantage of a person who doesn’t have representation, it’s downright wrong and no ethical and moral person would have any part of it.

Often in a hot market you’ll find predatory actions whereby some people put their gain and interest above everyone else’s. The Realtor’s job for their client is to protect them and help them navigate through the transaction and to limit risk. Most people will go through one or two real estate transactions in their lives, and what seems simple and easy can turn complicated and stressful very quickly.

There are a few things you can do in any transaction to protect yourself. First of all, make sure you know who’s working for you and who isn’t. In our standard form contracts, there is a term that clearly shows who each party is being represented by so make sure you understand that first and foremost. Secondly, if you’re unsure of anything in a contract or your rights in the transaction in general, then you can ask your agent or get legal advice before signing. In some of the cases of this “shadow flipping”, I can only presume an assignment clause existed even though it’s not a requirement for assignment necessarily. In a hot market, a represented seller would likely never agree to this and would want an assignment clause that required them to endorse any such assignment.

With a transaction as significant as real estate, you deserve to have someone working for you. If I was a seller and someone offered me way more for my home than I paid then, yes, it would be tempting to take the deal, but never sign anything you don’t understand completely and always get advice from a knowledgeable and trustworthy source.

The concept of a real estate agent behaving in a way so contradictory to their purpose is disheartening. I got into this industry because I love to help people. I work hard for my clients but, alas, a sensational story about people being taken advantage will always sell more newspapers than a story of people actually receiving the help they need and being satisfied.

If you have any questions about agency or how working with a Realtor works, then visit your local brokerage and ask.

You can also visit the BC Real Estate Council website for more information (

*This column is for entertainment only and not intended to be construed as advice in any way. Information should be independently verified and all sellers and buyers are encouraged to contact their Realtor for help with buying and selling. This is not intended to solicit business. No chipmunks were harmed in the writing of this column.

Geoff Hill is a licensed Realtor ® with MaxWell Realty Invermere, holding a trading services licence since May 2008. Originating from West Vancouver, he came to the valley for the snow and stayed for the people and lifestyle. Geoff enjoys volunteering with the local fire department and roller derby team as well as playing roller derby and many other sports himself.

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