As reported in eMemo #4351, BCFSA is advising all licensees to exercise heightened caution regarding the use or proposed use of “cash back” clauses in real estate transactions. These arrangements typically involve a buyer offering an inflated purchase price, with a portion of the funds returned by the seller after completion, often documented separately and outside the Contract of Purchase and Sale.
BCFSA highlights the following key regulatory risks:
• Potential mortgage fraud: Cash back arrangements may misrepresent the true purchase price to a lender, affecting loan-to-value calculations and potentially leading to a lending decision that would not otherwise be granted.
• Money-laundering concerns: These practices may be used to disguise the source or movement of funds and may trigger FINTRAC reporting obligations.
• Professional misconduct: Licensees who participate in or knowingly facilitate such arrangements risk disciplinary action, reputational harm, and contributing to practices that undermine public confidence in the real estate sector.
• Market distortion: Inflated sale prices resulting from cash back agreements can artificially affect property values and future market activity.
Members are reminded of their obligations under the Real Estate Services Act and the Real Estate Services Rules, including duties to act honestly, with reasonable care and skill, and in the best interests of clients and the public. If approached by a client to engage in a cash back arrangement, members should immediately consult their Managing Broker and adhere to brokerage policies. Any suspected fraudulent activity must be declined and reported to FINTRAC, and police should be contacted where criminal activity is suspected.
For detailed guidance and regulatory expectations including the full BCFSA Advisory, visit the BCFSA website.