By Condo Culture
With an increase in pre-construction developments in Kitchener-Waterloo, we're seeing a correlated increase in assignment sales. When a buyer purchases a condo during the pre-construction phase, they sign an agreement of purchase and sale (APS) which outlines the price, any add-ons (parking, locker…), the terms and conditions of the agreement, etc. Before construction is finalized and the buyer takes occupancy, the original purchaser may sell (with the necessary approvals) their rights to the property via an assignment sale of the APS to a new buyer. When you purchase an assignment, you are effectively taking over the original contract and terms as it already exists.
This week, we take a look at 9 STEPS involved in selling an assignment. For a more general overview of assignments and the benefits to assignors (sellers of assignments) and assignees (purchasers of assignments), check out our earlier blog post Condo Assignments Explained as well as this short video from REALTOR® Tim Bolton on a previous project Circa 1877.
As assignment sales can be slightly more complex than other real estate transactions, working with an experienced REALTOR® and lawyer can help to simplify this process. In the last 3 months alone Condo Culture has helped to facilitate dozens of assignment transactions! We are EXPERTS in this space.
Step 1. Review The Terms Of Your APS In order to sell an assignment, an assignment clause must be included in the agreement of purchase and sale. This clause will include the details and terms of listing an assignment. Most builders in the Region charge a 1% assignment fee. Some builders will not allow assignment sales. Carefully review your documents and consult with your REALTOR® for the specifics of your agreement.
Step 2. Approval Builders typically still reserve the right to deny an assignment even if an assignment clause is included in an APS; always contact the builder to confirm your ability to assign your unit.
Step 3. 'List' Your Assignment Most builders in the region will not permit the advertisement of assignments on MLS or Realtor.ca. Condo Culture helps advertise and sell assignment listings for its clients through condoculture.ca, the area’s top condo specific search site as well as our condo specific social media and our internal client database with thousands of active condo buyers.
Step 4. Negotiate An Offer Once an offer is received, the price and the terms of the assignment sale will be negotiated.
Step 5. First Deposit The assignee will provide an initial deposit, which will make the conditional offer legally binding. This deposit is held in trust by the real estate brokerage or lawyer’s office.
Step 6. Work Through The Conditions Of An Offer Both assignee and assignor may have specific conditions (i.e. financing and lawyer review) outlined in the conditionally accepted offer that have to be met. This process is normally much lengthier than a typical resale real estate transaction.
Step 7. Vendor Approval A request must be made to the builder to approve the new assignee. At this time, the assignee will be required to provide proof of financing (e.g. mortgage letter).
Step 8. Second Deposit The assignee will provide a second deposit which in most cases would be the initial purchase amount provided by the assignor to the builder (i.e. 15%). This deposit is released to the assignor.
Step 9: Profit Generally speaking, the assignor will not receive the profits (the difference in the assignment price and the original condo purchase price) from the sale of the assignment until the closing of the unit.
With demand for real estate continuing to outpace supply, condo assignments can be an attractive option for buyers looking to enter the market. Be sure to contact our team of experts for additional information.