By Condo Culture
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?
Benefits of Assignments for Assignors?
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.
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