What is A Condo Assignment?
Have you heard about buying a condo on assignment?
It’s becoming more and more common in the real estate market. But can you really take over another person’s mortgage?
Let’s take a look at how assignments work, their advantages, disadvantages and how you might use this strategy to get your dream condo.
Defining Assignment of Contract
An assignment is when a Seller (assignor) sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser.
When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract.
The Buyer (Assignee) of an assignment is essentially stepping into the shoes of the original purchaser.
In short, an assignment clause allows the assignee (buyer) of a home to sell the place before they take possession of it.
Are Assignments Legal?
Yes. Real estate contracts are assignable under the law unless the contract expressly forbids it.
Assignments are legal and can be a beneficial tool for both buyers and sellers when done correctly.
Example: If a buyer’s financial or personal circumstances change prior to completion,
They can assign the contract to another buyer without canceling the arrangement with the seller if they choose to.
How is Assignment Different from A Regular Real Estate Transaction?
Assignment of Contract differs from a regular real estate transaction because in an assignment you are not buying or selling a home, rather you are buying or selling an interest in a contract to purchase a home once it’s complete.
The Paperwork involved with an assignment is a bit more complicated than your standard Real Estate Transaction.
Why do Assignments Happen?
1. Buyer’s Circumstances
Often when people invest in pre-construction condos, there is a significant amount of time between when the initial contract is signed and the completion.
During that time, it’s very common that a Buyer’s circumstance might change like: loss of employment, death, critical illness etc. What worked for a Buyer few years ago may not work at the time of closing.
2. Financial Constraint:
Another reason is that that buyer might not be able to complete on the transaction due to insufficient funds or financing problem.
In some cases, it is cheaper to assign the contract to a new buyer than reneging on the sale.
3. Speculative Investing:
Some investors just don’t have the intention of closing on the property and they are banking on quick appreciation of the property.
In resale, assignment of contract for profit is less common now than it used to be.
What is the Role of A Builder in Assignment Sale?
Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and read it.
Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder
There may be additional requirements as well, the most common being that the Builder has to approve the assignment.
Are There any Marketing Restrictions on Assignments of Contract ?
Yes, depending on the details of our contract, it will stipulate whether or not you can assign the contract or not and other terms & conditions.
One of the most common condition is: No Advertising on MLS, Realtor.ca or public facing forums, which makes it hard for a realtor to sell assignments
LUCKILY, there is a solution.
Realtors at Ipresale condos specialize with assignment sales. They won’t advertise the property but they will use their current network and tap into their resources to get you best possible deals on your assignment.
Assignment Buyer's FAQs
#1: Can I renegotiate the terms of the agreement in place?
No. When you’re buying a condo assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to
There might be some potential risks associated with buying an assignment, so it’s very important to work with an experienced real estate lawyer.
However, assignors might be amid a life transition, and they might be eager to make a deal and move on, which might help you get a better deal
#2: Which costs will I pay as a Buyer?
When purchasing a condo assignment, you will be responsible for all the closing costs when the building is registered with the city.
Closing costs include Land Transfer Tax, Development Charges, Utility Connection Fees, HST and any legal fees. It is also at registration that your mortgage will officially begin.
Keep in mind, you are completely exempt from HST on a pre-construction condo if you plan to use the property as your principal residence. Investors who are leasing their condo will need to pay HST upfront.
Your real estate lawyer can file for a full HST rebate, refunded approximately 4 to 6 weeks later, provided you have a one-year lease in place.
#3 Buyer's Advantages of Assignment
Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract.
Built In Equity: When someone is selling a condo before closing, they are typically leaving some of the equity that the condo has earned on the table for you to inherit.
Less Competition: Fewer people know about assignments.
Better Deal: Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.
Assignment Seller's FAQs
#1: How will I get my Deposit Back?
The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and potential tax on the profit.
Builder’s assignment fees can range from $1000 to as high as $20,000, depending on your contract.
Real estate commissions on assignments are paid by the sellers. The assignment fee and builder’s lawyer fee is also paid by the sellers.
The profit earned from an assignent sale might be subject to tax. Only a tax accountant that specializes in or a real estate transactions can advise you how best to claim your profits.
We have a team of accountants at Ipresalecondos.com, that can help you get started. Please contact us for more information
#2: What Costs will I Pay as a Seller?
When a buyer buys on assignment (also known as a “assignee”), they normally pay the assignor their entire deposit.
On closing day, you should receive the money you’ve paid so far, combined with your profit (sometimes), in a conventional agreement.
#3: How will I get my Deposit Back?
When a buyer buys on assignment (also known as a “assignee”), they normally pay the assignor their entire deposit.
On closing day, you should receive the money you’ve paid so far, combined with your profit (sometimes), in a conventional agreement.
#4: How can I find a Buyer?
The builder may be able to cancel your agreement—and keep your deposit—if you market your assignment in breach of your contract.
Therefore, engaging with a seasoned realtor who is familiar with the assignment condo market is your best bet for finding a buyer.
Please contact us for getting started with an Assignment of Sale Pro
Conclusion
As an informed consumer you should be aware of the pros and cons of purchasing a pre-construction condo in addition to comprehending the assignment procedure.
Condo assignment sales, when done appropriately, can benefit purchasers, sellers, and developers. Just keep in mind that the paperwork involved with an assignment is a bit more complicated than your standard real estate transaction.
Many agents and even real estate lawyers are not familiar with this type of sale, so make sure you use an agent who’s familiar with how to complete an assignment sale.
At Ipresale Condos we have handled a number of assignments for our clients.
Please call or text at 604-825-8881 or email at info@ipresalecondos.com for an Assignment Pro.
