Assignment Sales Explained

Assignment Sales are an important part of the real estate landscape in Toronto. About 10% of condo units are sold this way every year. But, if you have never worked with them before, Assignment Sales can seem confusing. This blog will explain how assignments work and the advantages of buying a condo or property on an Assignment Sale.

What is an Assignment Sale?

An “Assignment” is a real estate transaction where the original buyer (the “Assignor”) sells their buyer’s rights to another buyer (the “Assignee”). In Toronto, assignments are common in pre-construction condos.

Assignor: is the original buyer of the condo unit. The Assignor purchased the unit 3-5 years ago at the pre-construction sales phase from the builder, via a VIP agent. In an assignment transaction the assignor is the seller of this original agreement of purchase and sale.

Assignee: is the buyer of the Agreement of Purchase and Sale from the Assignor. In an assignment transaction the assignee is the new buyer of the assignor’s agreement of purchase and sale

Advantages of buying a property on an assignment sale

• Options: More choices when there’s a shortage of listings in the market.
• Less Competition: Fewer people look at these types of listings.
• Peace of Mind: Fewer people looking at these sales means there’s less of a chance for a bidding war. You can avoid bidding wars and paying more than you can afford just to outbid another buyer.
• You Become A VIP: You will likely inherit VIP incentives like the seven-year Tarion Warranty Program and other incentives from the builder such as credits, upgrades, capped developing charges and much more.
• More Choices: Depending on how far along construction is, you may still be able to select your own finishes, colors and upgrades.
• Negotiate: Sellers usually need to sell because they need to have access to their equity, or financial difficulties with closing the deal with the builder. This can give you leverage for prices, deposits, and closing dates.
• Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract. Oftentimes the occupancy date is just a couple of months away.

Keep These Things in Mind When Buying on Assignment

Agreement of Purchase & Sale Cannot Change

When buying a condo assignment, you are inheriting the contract from the original purchaser as it already exists. It’s important to have your lawyer review the contract but note that the terms the Assignor agreed to are no longer negotiable.

Payment Structure

A typical deposit structure for a pre-construction condo is 15% to 20% spread out over a couple of years – this varies from developer to developer. Depending on what phase the building is in when you purchase the assignment, you will pay the Assignor the deposits they have already paid to date. Overall, this could be 15-20% up front. The remaining balance will be paid to the builder, and the profit portion (if any, but usually there is) to the original purchaser.

Closing Costs

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 able to benefit from a rebate ($24,000) from the 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 lawyer can file for a full HST rebate, refunded approximately 4 to 6 weeks later, provided you have a one-year lease in place.

Use a Seasoned Real Estate Broker

Using a broker who is seasoned and well-versed in assignment sales will help your transaction go smoothly. The same with your lawyer and mortgage broker. 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. (Contact Clara Chan - Assignment Specialist at 416-930-3063 for your assignment related questions. She knows the ins and outs from start to finish for the Assignment transaction)

Customizing Your Unit

Depending on the timing of the assignment, you may be able to select your own finishes. The builder contacts the buyer typically one year prior to completion for these custom details.

Assignment sales may be an excellent option for investors or homeowners. However, they still can be complicated as the risks and requirements are different as opposed to the usual purchase and sale of a property.

It is vital to work with an experienced Realtor or Broker who understands the intricacies of assignment sales so that they can guide you seamlessly through the process.

Contact us today if you’re interested in learning more about assignment sales.

(Contact Clara Chan - Assignment Specialist and Developer Approved Platinum Broker, at 416-930-3063 for your assignment related questions. She knows the ins and outs from start to finish for the Assignment transaction)