Condo Assignments Explained

__What is an assignment sale? __

In preconstruction, a condo unit isn't owned by its purchaser until all units in the condo development have been completed and the building has been registered. Only a purchaser’s legal rights and obligations outlined in the Agreement of Purchase and Sale (APS) can be sold prior to the building's completion. This is referred to as an assignment sale. The seller of this contract is the assignor and the purchaser, the assignee.

__Why Do Assignment Sales Happen? __

Preconstruction condos can take years to build. During the construction of a new condo, the circumstances of the original purchasers can change and they may no longer be willing or able to fulfill their financial obligations. When this happens purchasers can opt to sell their purchase contract to a willing buyer.

How much do Assignment Sales Cost?

There may be a fee associated with assignments. This fee can range between $3,000-$5,000 and is to be paid by the assignor. In some situations, developers may also waive this fee.

There are also a number of other legal and real estate costs and tax implications to be considered. As assignment sales may be more complex than other real estate transactions it is important that assignors and assignees work with a team of experienced real estate, legal and accounting professionals who understand assignment sales, are able to protect the interests of all parties involved and are able to simplify the process saving both money and time.

__Who pays what and when? __

Upon acceptance of a conditional offer, a deposit will be required to make the agreement legally binding. This amount can be negotiated.

Soon after, once the conditions have been satisfied, the assignee will be required to provide another deposit. In many cases, this deposit will be the same amount that was provided to the developer when the unit was originally purchased by the assignor (i.e. 15%).

Depending on the terms of the assignment the assignee will also be responsible for paying the profit (the difference in the assignment price and the original condo purchase price) to the assignor 1. once the developer approves the process or 2. when the seller takes possession and receives a mortgage. At Condo Culture the latter is most commonly seen.

Because a mortgage cannot be obtained at the time of the assignment sale (only once the development has been completed and registered), it is important that the assignee has access to enough cash on hand to cover the assignment and all of the associated costs.

Upon purchasing the assignment contract the assignee assumes responsibility for all outstanding costs relating to the condo at closing and during occupancy.

__What is an assignment clause? __

This is a clause that must be included in the APS to allow assignors to sell their contract through an assignment. Without it, assignments will not be permitted by the developer. If this clause is not included in the original APS, a request can be made to have it added as an amendment at the time the unit is initially purchased. In some cases developers may also not allow for assignment sales.

Advertising an assignment?

Most builders in the region will not permit the advertisement of assignments on MLS or realtor.ca. Be sure to consult with your realtor, lawyer and the developer for clarification on what is legal and permissible. Condo Culture uses its website, social media and internal client database to help advertise and sell assignment listings for its clients.

Benefits of Assignments for Assignees?

• Access to a Project that may be already Sold Out - Purchasing an assignment can be a great way to get into a project that is in high demand and otherwise sold out. The first phase of Station Park for example launched and sold out late 2019. Interested purchasers can still access this project however by purchasing one of the current assignment sales available. See our featured listings for more information.
• Value Opportunity - In some scenarios, assignments may be as a result of an assignor who is motivated to sell based on changes in life circumstances. In these situations, it may be possible to negotiate and purchase an assignment at a reduced price. Assignments may also present opportunities to purchase at a lower price than eventual market values at time of building completion (ie you purchased an Assignment 6 months before building completion when market values are rising).
• Less Competition - Given that assignments are a unique product type, many purchasers and even some realtors aren't as familiar with them. This may mean less competition for these units, which can be advantageous to purchasers especially in extremely competitive real estate markets.

__Benefits of Assignments for Assignors? __

• Freedom - By selling your assignment contract, you are no longer legally obligated and binded to the terms of your APS. You also have the freedom to use or reinvest the money of the assignment as you see fit.
• Profit - Where the price of the condo unit has increased significantly since it was initially purchased the assignor may be able to sell an assignment and realize a profit. Many developers discourage using assignments solely as a strategy to profit and it is strongly advised that assignors fully understand all costs associated with an assignment before attempting to do so.
• No Closing Costs - Because the assignment is sold prior to construction completion, the assignor will not have to take out a mortgage or be responsible for any of the closing costs.

For more information on assignments in the Waterloo region, watch this video where Condo Culture Sales Representative Tim Bolton, discusses the assignment process at CIRCA 1877, one of Kitchener-Waterloo's newest and most sought after condo developments.

At Condo Culture, we are experts in all things condos, this includes condo assignment sales.

Click here to speak with a Condo Culture representative to learn more about how assignment sales work or to discuss buying or selling an assignment.