What Is An Assignment Sale?
The real estate market in Toronto is an ever-growing and dynamic industry with various methods of property sales, including assignment sales. An assignment sale is a real estate transaction where the buyer of a property, who previously signed a purchase agreement with the developer, assigns or transfers the rights to purchase the property to a third party. Assignment sales are increasingly becoming a popular method of buying and selling properties in the Greater Toronto Area, and they come with unique benefits for both the seller and the buyer.
What Is An Assignment Sale?
An assignment sale, as mentioned, refers to a real estate transaction where, during the pre-construction phase, one or more buyers of the property decides to sell or assign their rights to buy the property to another third party before closing. In simple terms, the buyer agrees to give ownership of an unbuilt unit to another person before completion, meaning they sell their right to purchase. The new buyer then assumes the purchase contract and closes the sale with the developer. Essentially, the assignee, or the new buyer, takes over the contractual obligations of the initial buyer.
How Assignment Sales Work?
Assignment sales can only occur before the final closing of a property or before the project has been completed.
Before the sale, the assignor should have consulted with the developer and obtained their permission to sell the property. Then, the assignor must find a buyer (assignee) for the property and ensure they agree to the terms and conditions of the property contract.
Once an assignee is identified, the parties involved (assignor, assignee and the developer) must sign a legal agreement known as an "Assignment of Agreement of Purchase and Sale" which assigns the assignor's rights and obligations under the original purchase agreement to the assignee. The assignor usually recovers their initial deposit plus any other pre-agreed fees such as legal costs, less the original purchase price.
The new assignee will be responsible for the remainder of payments, and they will also assume all obligations and costs relating to the purchase contract. Once the construction is complete, and the townhouse, condo, or housing project is ready for occupancy, the new buyer can assume the original agreement of purchase and sale and have the title transferred to them.
Benefits of Selling a Home on Assignment
The potential to earn a profit: When you sell a home on assignment, you are essentially selling the right to purchase the property before it is completed. This means that you can potentially earn a profit by selling the property at a higher price than you paid for the right to purchase it in the first place.
You don’t have to close on the property: By selling on assignment, you can avoid having to complete the sale or close on the property. Closing costs on a new home or condo can add up, and are typically more than resale closing costs. By selling on assignment you are transferring those costs to the buyer.
You don’t have to get a mortgage: Because you won’t be closing on the property, you never have to get a mortgage. This can be a smart way to get into the real estate market and grow your wealth.
Benefits of Buying a Home on Assignment
Equity Gain: Typically when a seller sells on assignment they are leaving some of the equity on the table in order to not have to close on the deal. This allows purchasers to buy at a lower price than if the home was already built.
Avoiding Builder Delays: When buying pre-construction from a developer, there can be delays in the closing date, which can be frustrating for the buyer. However, if a buyer purchases an assignment contract, occupancy and closings are usually right around the corner, meaning the buyer typically doesn’t have to deal with delay after delay.
More room to Negotiate: When someone sells on assignment, they are typically motivated to sell to avoid having to close on the property. This gives the buyer room to negotiate.
Things to Consider When It Comes to Assignment Sales
Risks: As with any real estate transaction, there are risks associated with assignment sales. Buyers should ensure they are aware of all terms and conditions of the original purchase agreement, as well as the details of the assignment sale agreement. Sellers should also be aware that despite the increasing popularity of assignment sales, it may be difficult to sell the property to an interested and qualified buyer, which is why investors often purchase properties in demand areas such as Toronto, where the likelihood of finding a buyer is higher.
Legal considerations: Buyers should ensure that they get legal assistance from an experienced real estate lawyer to ensure that the transaction is done correctly and legally.
Market Conditions: The prices of properties frequently fluctuate, and the prices at the time an assignment takes place do not necessarily reflect the current market value of the property. Therefore, buyers and sellers must research
Assignment sales have some great benefits for both buyers and sellers. If you are interested in learning more about how buying pre-construction and assignment sales can help you grow you wealth, please don’t hesitate to reach out!
