Looking at purchasing a pre-construction condo? You may have come across the term “Assignment”. Here’s the info on Assignment Sales and some useful information you should know before you begin.
What is an Assignment Sale?
An Assignment Sale occurs when a buyer successfully allows a third party to assume the rights and responsibilities of an Agreement of Purchase and Sale, prior to completion of the transaction. The third party, known as the “assignee”, then completes the transaction with the original seller and the original buyer (assignor) is free of all obligations to the transaction.
Sales of Pre-construction condominiums typically begin years before the condominium is constructed and ready for occupancy. Due to this protracted period of time, scenarios arise in which the original buyer is either not in need of the unit, or is unable to fulfill their duties with respect to payment and contract completion. For example, the buyer may have encountered financial difficulty, moved to a new city, or found a resale unit within the time period and decided to relocate instead.
Assignment sales can be used as a means to profit via the market. For example, a buyer who is bullish on market conditions may begin by purchasing 3 pre-construction units. In the next year, the market rises to his favour, causing his pre-construction units to be worth more than that which he paid. He may then wish to list and sell two of those units, keeping only one for himself. In this scenario, the buyer has just made a profit from the two additional units, while securing the base price in the building for himself.
Assignment sales, however, are not always profitable. Developers who price their condo based on market speculation at the time of occupancy may cause units to be overpriced. In the event the market takes a downturn, a potential assignment could be listed at less than the original purchase price. In this scenario, the initial speculative investor would lose money on their investment.
What to Look For in an Assignment Sale
If you’re looking to assign your pre-construction condo, its typical to ask for a deposit equal to that of what you may have paid to the developer, to ensure that your initial cost is recovered. The remainder of the payment terms can then be negotiated with your potential buyer.
An Assignment Sale can be an incredible opportunity to purchase a unit that you may have missed during the pre-construction sale phase. Even if an assignment is selling for double its original price, the unit could still be worth more upon completion. It’s important to ensure that your best interests are being considered in this regard. Contact ReaLawState for more information regarding Assignment Sales and the pre-construction condo world.
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