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Probe into New Coast Realty shadow flipping too slow, critics say

Former New Coast realtors stand outside the company’s office in Richmond in March, 2016. After a Globe story, conditions were imposed on New Coast to ensure it complies with provincial laws.

Ben Nelms/The Globe and Mail

The Real Estate Council of British Columbia says its investigation into a Vancouver-area realty firm linked to so-called "shadow flipping" remains a priority, but critics say the case has dragged on for too long despite promises from the regulator and the government to improve enforcement within the industry.

The council launched its investigation into New Coast Realty in April of last year, following a Globe and Mail story that detailed training sessions in which the owner of the company told agents how to make quick commissions.

The company was also the focus of a Globe and Mail report on the practice of shadow flipping, in which properties are purchased and then resold multiple times for a higher price before the original deal closes.

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More than a year later, the council says it continues to investigate the firm but declined to offer any specific details about its progress. Vancouver realtor Keith Roy said the reasonable length of time for such an investigation "has passed."

"I'm disappointed for the people who feel they have been wronged," said Mr. Roy, a realtor with Re/Max Select Realty. "They deserve closure and the public needs to know that they can have confidence in the real estate brokerage they hire."

New Coast has denied any wrongdoing, and the company's compliance officer, Rosario Setticasi, said the firm is fully co-operating with the real estate council. He confirmed the company has not received any disciplinary decisions from the council.

Mr. Setticasi said in a statement the company has provided information to the council that demonstrates it has followed all rules and regulations, and that the company "specifically denies the allegations detailed in media reports leading to the investigation."

The Globe and Mail reported on shadow flipping in March of last year.

The provincial government responded by banning the practice and taking away the industry's ability to regulate itself, promising to introduce stricter rules and ensure the Real Estate Council of British Columbia (RECBC) had the resources to enforce them.

The following month, The Globe reported on training sessions conducted by New Coast's owner, Ze Yu Wu. An audio recording of one session featured Mr. Wu coaching agents on how to earn quick commissions by telling homeowners the first offer on a property is always best.

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The RECBC subsequently announced its investigation and imposed a series of conditions on the company. Those conditions included the appointment of a managing broker approved by the council, as well as the submitting of monthly reports.

RECBC spokeswoman Marilee Peters said in a statement that the agency has made the case a priority, though she declined to answer any questions about the investigation. She noted it had imposed conditions on New Coast to ensure it complies with provincial laws for real estate brokerages.

"The council took an unprecedented degree of control and oversight of the activities at New Coast Realty," the statement said. "We took these steps to protect consumers and ensure the brokerage co-operates with our investigation."

She said it would be difficult to predict how long such a complex investigation would take. She added New Coast has complied with its conditions.

B.C.'s Ministry of Finance, which oversees real estate regulation, declined to comment and instead referred questions back to the real estate council.

Janet Mackenzie, who has been vocal about the need to regulate the industry after her former agent was fined by the council, said it's "discomforting" to hear such a high-profile investigation has taken so long. Ms. Mackenzie's case is unrelated to New Coast.

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"If they can't even have a quick and efficient investigation when they have it on the front page of the paper, what are they doing for all the other things that are happening?" Ms. Mackenzie said. Her agent was fined $2,500 by the council and $10,000 by his local board for admitting to forgery.

The real estate council opened 902 investigations from July 1, 2016, to June 30, 2017. Of those, 769 were the result of complaints – a 40-per-cent increase from a year earlier – and 133 were initiated by the council.

Ms. Peters said the council has seven compliance officers who investigate complaints, but it is in the process of hiring an additional four to increase its investigative capacity.

A spokesman for the Real Estate Council of Ontario, Adam Hawkins, said although each case is unique, the typical time for an investigation in that province grew to around 280 days in 2016. He said the council aims to reduce that to 120 days or less by the end of this year.

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