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10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

— We take our content seriously. This article was written by a real person at BREL.

What’s an assignment?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.

The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.

Do assignments only happen with pre-construction condos?

It’s possible to assign any type of property, pre-construction or resale, provided there aren’t restrictions against assignment in the original contract. An assignment allows a Buyer of a any kind of home to sell their interest in that property before they take possession of it.

Why would someone want to assign a condo?

Often with pre-construction sales, there’s a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

Another common reason why people want to assign a contract is financial. Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale.

Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.

What can be negotiated in an assignment sale?

Because the Assignee is taking over the original purchaser’s contract, they can’t renegotiate the price or terms of the contract with the Builder – they are simply taking over the contract as it already exists, and as you negotiated it.

In most cases, the Assignee will mirror the deposit that you made to the Builder…so if you made a 20% deposit, you can expect the new purchaser to do the same.

Most Sellers of assignments are looking to make a profit, and part of an assignment sale negotiation is agreeing on price. Your real estate agent can guide you on price, which will determine your profit (or loss).

Builder Approval and Fees

Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and actually read it.

Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we’ve seen everything from $750 to $7,000).

There may be additional requirements as well, the most common being that the Builder has to approve the assignment.

Marketing Restrictions

Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you from posting it to the MLS or advertising it online. This makes selling an assignment extremely difficult…if people don’t know it’s available for sale, how they can possibly buy it?

While it may be very tempting to flout the no-marketing rule, BE VERY CAREFUL. Buyers guilty of marketing an assignment against the rules can be considered to have breached the Agreement, and the Builder can cancel your contract and keep your deposit.

We don’t recommend advertising an assignment for sale if it’s against the rules in your contract.

So how the heck can I find a Buyer?

There are REALTORS who specialize in assignment sales and have a database of potential Buyers and investors looking for assignments. If you want to be connected with an agent who knows the ins and outs of assignment sales, get in touch…we know some of the best assignment agents in Toronto.

What are the tax implications of real estate assignment?

Always get tax advice from a certified accountant, not from the internet (lol).

But in general, any profit made from an assignment is taxable (and any loss can be written off). The new Buyer or Assignee will be responsible for paying land transfer taxes and any HST that might be due.

How much does it cost to assign a pre-construction condo?

In addition to the Builder assignment fees, you will likely have to pay a real estate commission (unless you find the Buyer yourself) and legal fees. Because assignments are more complicated, you can expect to pay higher legal fees than you would for a resale property.

How does the closing of an assignment work?

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. On the second closing (between the Builder and the Assignee), the Assignee pays the remaining amount to the Builder (usually with the help of a mortgage), and pays land transfer taxes. Title of the property transfers from the Builder to the Assignee at this point.

I suppose it could be said that there is a third closing too, when the Buyer takes possession of the property but doesn’t yet own it…this is known as the interim occupancy period. The interim occupancy occurs when the unit is ready to be occupied, but not ready to be registered with the city. Interim occupancy periods in Toronto range from a few months to a few years. During the interim occupancy period, the Buyer occupies the unit and pays the Builder an amount roughly equal to what their mortgage payment + condo fees + taxes would be. The timing of the assignment will dictate who completes the interim occupancy.

Assignments vs. Resale: Which is Better?

We often get calls from people who are debating whether they should assign a condo they bought, or wait for the building to register and then sell it as a typical resale condo.

Pros of Assigning vs. Waiting

Get your deposit back and lock in your profit sooner
Avoid paying land transfer taxes
Avoid paying HST
Maximize your return if prices are declining and you expect them to continue to decline
Lifestyle – sometimes it just makes sense to move on

Cons of Assigning vs Waiting

The pool of Buyers for assignment sales is much smaller than the pool of Buyers for resale properties, which could result in the sale taking a long time, getting a lower price than you would if you waited, or both.
Marketing restrictions are annoying and reduce the chances of finding a Buyer
Price – What is market value? If the condo building hasn’t registered and there haven’t been any resales yet, it can be difficult to determine how much the property is now worth. Assignment sales tend to sell for less than resale.
Assignment sales can be complicated, so you want to make sure that you’re working with an agent who is experienced with assignment sales, and a good lawyer.

Still thinking of assignment your condo or house ? Get in touch and we’ll connect you with someone who specializes in assignment sales and can take you through the process.

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Raj Singh says:

What can be things to look for, especially determining market value for an assigned condo? I’m the assignee.

Sydonia Moton says:

Y would u need a lawyer when u buy a assignment property

Gideon Gyohannes says:

Good clear information!

Who pays the assignment fee to the developer? Assignor or Assignee?

Thanks Gideon 416 4591919

Melanie Piche says:

It’s almost always the Seller (though I suppose could be a point of negotiation).

Fiona Rourke says:

If there are 2 names on the agreement and 1 wants to leave and the other wants to remain… does the removing of 1 purchaser constitute an assignment

Brendan Powell says:

An assignment is one way to add or remove people from a contract, but not the only way…and not the simplest. Speak to your lawyer for advice on what makes the most sense for your specific situation. For a straightforward resale purchase you could probably just do an amendment signed by all parties. If it’s a preconstruction purchase with various deposits paid, etc it could be more complicated.

Katerina says:

Depends on the Developer. Some of them remove names via assignments only.

Haroon says:

Is there any difference in transaction process If assigner or seller of a pre constructio condo is a non resident ? Is seller required to get a clearance certificate from cRA to complete the transaction ?

Nathalie says:

Hello , i would like to know the exact steps for reassignment property please.

Amazing info. Thanks team. I may just touch base with you when my property in Stoney Creek is completed in. 2020. I may need to reassign it to someone Thanks

Victoria Bachlowa says:

If an assignor renegs on the deal and refuses to close because they figured out they could get more money and the assignment was already approved by the builder and all conditions fulfilled what can the Assignee do. I have $33,000 dollars in trust in the real estate’s trust fund. They sent me a mutual release which I have not signed. The interim occupancy is Feb. 1 and the closing is schedule for Mar. 1, 2019. I have financing in place, was ready to move in Feb. 1 and I have no where to live.

Definitely talk to your lawyer right away. They’ll want to look at your agreement of purchase and sale and will be able to advise you.

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. Can I assume that these closing happen at the same time? I’m not sure how and when I would be paid as the Assignor.

What happens to the deposits or any profits already paid if the developer cancels the project after an assignment?

Hi, Did you get answer to this? I did an assignment sale last year and now the builder is not completing apparently and they are asking for their money back. Can they do that? After legal transactions, the lawyer simply said “the deal didn’t go through”. Apparently builder and the person who assumed the assignment agreed on taking out the deal. What do I have to pay back after it was done a year ago

This is definitely a question for your lawyer – as realtors we are not involved in that part of the transaction. I would expect that just as the builder would have to refund your deposits, you would likely need to do the same…but talk to your lawyer. As to whether the builder can cancel a project, yes they always reserve that right (but the details of how and under what circumstances would be in your original purchase agreement). It’s one of the annoying risks in buying preconstruction!

I completed the sale of my assignment in Dec 2015 however the CRA says I should be reporting the capital income in 2016 when the assignee closed his deal with the developer in July 2016. That makes no sense to me since I got all my money in Dec 2015. Can you supply any clarification on that CRA policy please?

You’d have to talk to the CRA or an accountant – we’re real estate agents,so we can’t give tax advice.

Hassan says:

Hello, You said that there are two closings. The first one between the assignor and the assignee and the second one between the builder and the new buyer (assignee). My question is that in the first closing does the assignee have to pay the assignor the deposit they have paid and any profit in cash or will the bank add this to the assignee’s mortgage?

The person doing the assigning usually gets their money at the first closing.

Kathy says:

What is the typical real estate free to assign your contract with the builder ?

Hi Kathy While we do few assignments (as they are rarely successful, and builders do not make it easy), in past we have charged more or less the same as we do for a typical resale listing. While there are elements to assignments that should be easier than a resale (eg staging), many other aspects of assignments are much MORE time-consuming, and the risk much higher since attempts to find a buyer for assignments are often unsuccessful. It’s also important to note that due to the extra complication, lawyer’s fees to assign are typically higher than resale as well–although more $ for the purchase side vs the sale side.

Mitul Patel says:

If assignee has paid small amount of deposit plus the original 25% deposit that the assignor has paid to the builder and gets the Keys to the unit since interim possession has been completed, when the condo registration is done and assignee is getting mortgage from the Bank or Pays the remaining balance to the Builder using his savings and decides not to pay the Balance of the Profit amount to Assignor, what are the possibilities in this kind of scenario?

You’d need to talk to a lawyer to find out the options.

David says:

How much exactly do brokers get paid at sale of Assignment? i.e. Would the broker’s fee be a % of your assignment selling price or your home’s selling price? I’m really looking for a clear answer.

I am using this website’s calculator associated with selling your home in Ontario. But there is no information on selling assignments. https://wowa.ca/calculators/commission-calculator-ontario

Realtors set their own commission, so there is no set fee- that website is likely the commission that that agent offers. We often see commissions of 4-5% for assignments. The fee is a % of the price of the assignment – for example, you originally bought for $500K; you’re now assigning for $600K – commission would be payable on the $600K.

Candace says:

Question: if i bought a pre construction condo, can i sell it as soon as it closes or do i have to live in it for 1 year after closing in order to avoid capital gains taxes?

Or does the 1 year start as soon as you move in?

I would suggest you talk to your accountant re: HST credit implications and capital gains, but if you sell it for more than you paid for it, capital gains usually apply.

You mention avoid paying HST when you assign your property. What is the HST based on? It’s not a commercial property that you would pay HST. Explain. Thanks.

HST and assignments are complex and this question is best answered specific to your situation by your accountant and real estate lawyer. In some cases HST is applicable on assignment profits – more details can be found on the CRA website here:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html

If you are a podcast listener, the true condos podcast is also a great resource.

https://truecondos.com/cra-cracking-down-on-assignments/

heres one for your comment, purchase pre construction from builder beginning of 2021, to be finished end of 2021, (semi detached) here we are end of 2022, both units are now ready. Had one assigned but because builder didnt accept within certain time frame(they also had a 90 day clause wherein we couldnt assign prior to 90 less firm closing date (WHICH MOVED 4 TIMES). Anyrate now we have a new assinor but the builder says we are in default from the first one and wants 50k to do the assignment (the agreement lists the possibility of assigning for 12k) Also this deal would include us loosing our whole deposit and paying the 12k(plus fees) would be in addition too the 130k we are already loosing. The second property we are trying to close but interest rates are riducous, together with closing costs(currently mortgage company is asking that my wife be added to that one, afraid to even ask this builder. Any advice on how to deal with this asshole greedy builder? We are simply asking for assignment as per contract and a small extension for the new buyer(week or two) Appreciate any advice. Thank you

Dealing with builders/developers can be extremely painful, much worse than resale transactions in our experience. Their contracts are written to protect THEM. Unfortunately all I can say is follow the advice of your lawyer.

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A Comprehensive Guide To Selling Your Assignment Condo

Trying to resell your preconstruction condo before closing? This blog is for you. Assignment sales are more complicated compared to their resale counterparts, but with some guidance, the process is easy.

An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. Preconstruction condo assignments are prevalent because of the time lag between purchasing the home and the move-in date. While condo assignments might be the most popular type of assignment, any real estate contract is assignable. This blog is going to discuss condo assignments since they are the most prevalent, but *most* of the details apply to assigning a home or commercial preconstruction property as well.

In the GTA, our preconstruction market is booming. Toronto alone sees around 30,000 new home completions a year. Around 70% of preconstruction purchasers are investors. The remaining 30% of buyers are end-users who plan to use the property themselves. However, many investors, and end-users, might decide to sell the property before the final closing. Since there is no title to transfer, these buyers have to assign their contract to the next buyer.

What is a preconstruction condo assignment sale?

An assignment is when the original buyers of a preconstruction condo decide to sell their contract with the builder to another buyer before the home is complete. This differs from a regular real estate transaction because we are not buying or selling a home, rather we are buying or selling an interest in a contract to purchase a home once it’s complete. Essentially, the buyers are taking over the seller’s place in the contract with the builder. The new buyer pays the seller their deposits back, as well as any profit. In trying times, there might not be profit, and in extreme cases, the sellers might walk away from their deposits.

Assignments are like the wild-west equivalent of real estate. The buyers are called assignees, the sellers are called assignors, and there is no fixed closing date! You heard that right, the buyer purchases the contract not knowing whether it will close in 4 weeks, 6 weeks, or 8 weeks. In many cases, the buyers only have a rough estimate for the final closing of the property as well.

Every builder’s agreement of purchase and sale is different, so every assignment sale is different. You need legal and accounting advice before, during, and after an assignment sale. A real estate agent’s job in the transaction is to find a buyer, negotiate the contract, and coordinate the sale from start to finish. Your real estate agent might also connect you with accountants, and lawyers who can help make the necessary legal and tax declarations.

The Builder’s Role In Assignments:

Sellers often misinterpret their rights to assign in their purchase agreements with their builder. In the showroom, builders are quick to say their contract is assignable if you want to flip your contract before closing. However, builders can control when, how, and to whom you sell your contract.

It’s important to follow the rules set out by your builder when marketing your assignment. Deviating from the builder’s purchase contract can result in you losing your deposits!

Since all preconstruction home assignments require the builder’s consent, it’s important to prepare the file for their consent at your earliest convenience. The builder will want the same information they collected from you when you first purchased the home: full names, current address, sin, IDs (front and back), telephone number, emails, mortgage pre-approval letter, lawyer information… they will also want the buyer to replace all your cheques. Those could be cheques for future deposits, or cheques for interim occupancy fees. It’s important to advise the buyers to prepare all of this information before submitting the file to the builder, so there is limited delay assigning the property.

How do you sell an assignment condo?

The first step to selling your assignment is to review your original purchase agreement. The builder’s purchase agreement outlines restrictions and fees associated with assignments. An experienced realtor or lawyer can also review the contract with you. Next, email your builder’s customer service account and ask for permission to advertise the property for sale.

It’s important to thoroughly understand your preconstruction agreement, because some incentives offered to you might not be transferable to the buyer. Builders often offer incentives to direct buyers to stimulate sales. However, they sometimes make these incentives non-transferable. That could mean the free design dollars, or the capped development levies might not be available to the next buyer. It’s important not to advertise incentives that aren’t transferable.

The second step is to hire a Realtor to advise you on current market conditions. Your realtor will discuss marketing options as well as help you decide on a market price. There is a strong chance the builder will prohibit MLS listings of their properties. However, many builders will allow online marketing in places like Facebook, Instagram, WhatsApp, and brokerage websites.

While Realtor.ca is the best marketing platform out there, buyers looking for assignments know to look elsewhere. Don’t worry if you cannot market on realtor.ca. One of the advantages of Sotheby’s International Realty Canada is our vast marketing platform outside of Realtor.ca

Important Dates:

The first date you need to consider is the assignment closing date. This is the date the assignee officially takes over the contract from the assignor. On average, assignment closing happens within 3-6 weeks after an offer is accepted. This is when the assignee becomes the new owner of the property, and the assignee receives some of their deposit/profit back.

The second date to consider is the interim occupancy date. When buying preconstruction condos, there is usually a period between when the unit is ready for occupancy and before the building has registered with the city. Since no title exists yet, you cannot get a mortgage. Instead, during this time, you move in and pay the builder rent until final closing. Interim occupancy can last from months to years. During interim occupancy, buyers have the chance to view the unit which could help sell the home. Interim occupancy is when most assignment sales take place.

The third date you need to know is the final closing date. This is the date that the building registers with the city and the assignee pays the builder the balance of the purchase price, land transfer taxes, closing costs etc. Sometimes, assignees will negotiate to pay some of the assignors profit on final closing date, so they can roll it into the mortgage.

What Is Negotiable During An Assignment Sale:

Since the contract with the builder is already firm and binding, there can be no changes to that contract. The buyer is merely stepping into the seller’s shoes, in exchange for their deposits and profits. The assignment contract negotiates the purchase price and the deposit structure. The purchase price will indicate how much profit (or loss) the assignor receives in the transaction.

The payment schedule of an assignment is dependent on whether there is a profit or not. If the seller is making a profit or breaking even, then the buyers are expected to refund the full deposit paid-to-date by the sellers. In many cases, that is 20% of the original purchase price. If the seller is losing money on the assignment, then the buyers will bring a deposit for less than the deposits already paid to the seller. The deposit is due upon acceptance of the offer.

If there is profit, the assignee and assignor will negotiate when that profit is paid out. Remember when we mentioned the three important dates? the assignment closing, the interim occupancy date, and the final closing date? well, when it comes to negotiating when to pay the assignor their profit, we usually pick one of these dates to pay out the assignor’s profit.

The expected final closing is an important consideration for buyers when negotiating when to pay the assignor’s profit. The longer the final closing date, the more risk for the buyer. The reason? there is always a small risk the condo developer cancels the project. If a condo developer cancels the project, the buyers are returned their deposits paid-to-date. However, if a buyer has paid an assignor $100,000 in profit, that money is gone. So if there is a long closing, expect buyers to protect their final deposits by delaying it till interim occupancy, or final closing.

Conditions In Assignment Sales

After finding a buyer, the first hurdle to overcome is negotiating a fair deal. Once both parties are satisfied with the terms of the contract, we make the deal conditional on the lawyer’s review. This gives both the buyer and seller a chance to have the assignment contract, as well as the original purchase agreement, reviewed by a lawyer. Once both parties have spoken to their lawyers and are happy to continue, we put the deal to the developer to approve the new buyer. This condition usually lasts around 30 days. If the developer does not approve the new buyer within 30 days, the deal will become null and void, unless the buyer and seller both agree to extend that condition.

Once the developer accepts the buyer, the assignment will happen within a few days. Most contracts outline an assignment closing within 5 business days after the developer gives their consent. Some buyers will also include financing conditions in their assignment offer, so they have time to run the deal past their mortgage broker. However, most assignments are purchased with only lawyer review and developer consent conditions.

Here’s an example of selling an assignment for profit vs selling an assignment for a loss:

Below are four examples of the deposit/profit payment schedule for assignments.

Example 1 is a fantastic example of a preconstruction condo that appreciated $100,000. In this typical example, the assignee and assignor agreed to a deposit big enough to return all of the assignor’s deposits, as well as some extra profit to cover Realtor commissions. This deposit is usually transferred to the listing brokerage within 1 day of the offer being accepted and is released to the assignor on assignment closing. In this example, the assignor and assignee also agreed to pay the seller the rest of their profit at the final closing.

Example 2 shows the same conditions for the sale, except the assignee agreed to pay the assignor their full deposit and all their profit on the assignment closing date, instead of the final closing date.

Example 3 looks at an assignment where the assignor is taking a $100,000 loss. Instead of being paid their whole deposit on assignment closing, they are paid their deposit minus the difference between the purchase price and the sale price.

Example 4 is a rare case, where the market has turned significantly and the assignor is looking to transfer their assignment for $0. This means the assignor is walking away from all their deposits and will take no money to transfer their contract to the assignee.

What Does It Cost To Sell An Assignment condo:

The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and tax on the profit. Builder’s assignment fees usually range from $1500-$25,000 (in some extreme cases they go as high as $80,000). The assignor usually pays both the assignor and the assignee’s realtor commissions. The commission is something to negotiate with your agent. The total commission is usually 5% or less of the final sale price. There are likely taxes such as income tax, capital gains tax, or HST on the sale as well. Speak to your accountant about taxes due on the assignment sale.

Taxes due on an assignment sale:

The taxes on assignments are simple, however, buyers and sellers often confuse the HST taxes. That’s because there are two different HST taxes when talking about preconstruction assignments. Let’s clarify this! All new homes are subject to HST, however, end-users don’t notice the HST tax because the builder pays it and claims a $24,000 rebate on the end-user’s behalf. Alternatively, investors who purchase a pre-construction home are charged around $24,000 in HST, and are then able to claim a rebate for the HST they paid, if they rent the property out for one year. There are situations where an assignment will lose its eligibility for the HST rebate. If someone has lived in the home during interim occupancy, it will no longer be eligible for the end-user HST rebate.

The second HST tax we discuss when selling an assignment is the HST due on the profit. In many cases, the profit is subject to a 13% HST tax. In some cases, even the return of deposits is subject to HST.

The third tax is the income or capital gains tax on the profit. Any real estate property that is not your primary residence, as well as any business venture, is taxable as either a capital gain or as income. It’s really important to speak to an accountant before selling your assignment. Only an accountant can advise you whether you owe HST, capital taxes, or income taxes on your assignment sale.

Is it better to sell an assignment or wait till the condo is ready?

The pros to assigning a condo:

Receive your deposits and profit sooner
Avoid market risks. Savvy investors might look to assign their property if they sense the market might depreciate in the coming months/years.
Avoid paying closing costs (land transfer taxes, development levies, utility hookups, and more). These usually come to a little more than 5.5% of the purchase price
No mortgage or financing required
Minimize holding costs (if you sell before interim occupancy or before final closing, there are no property taxes, maintenance fees, utility fees, insurance, mortgage, etc)

Cons to assigning a condo

Developer restrictions (limiting the marketing of the property, limiting when they are accepting assignments)
Market perception and buyer’s hesitancy when buying a property sight-unseen
Market fluctuations suppressing buyer demand
Limited buyer pool and most of the buyers are investors who want a good deal
Usually sell for a lower price than comparable resale properties
Financing challenges for the buyer if the property does not appraise at the new purchase price
Potentially more taxes compared to closing and reselling

The most common mistakes when selling an assignment:

Hiring the wrong representation, or not relying on professional advice:.

As active realtors in the assignment market, we come across quite a few mistakes. But most of them could be avoided if the buyers and sellers were represented by experienced realtors and lawyers. The agreement of purchase and sale for an assignment is very different compared to an agreement of purchase and sale for a resale home. One of the most common mistakes we see from buyers and sellers is assuming the paperwork their realtors drafted is correct, and forgoeing their right to have their lawyer review the assignment paperwork.

Poor communication/understanding:

This happened to my assignment buyers recently. They purchased a home where the seller’s representative told us the finishes had not been chosen yet. We protected our buyers by including clauses to that degree. However, a few days after the assignment closing, we learned the sellers chose the finishes a few days before closing. Luckily, the developer allowed the buyer to make changes to the finishes at an additional fee.

Ignoring deadlines or dragging your feet:

Assignments come with a lot of moving deadlines, and there are a lot more parties involved compared to a resale property. Always return paperwork and signatures as soon as possible. Compared to a resale property where the only parties are the buyer, seller, and their agents and lawyers, an assignment involves the developer, the developer’s lawyers, the buyer and seller agents, and the buyer and seller lawyers. If everyone took 3 days to return paperwork, the conditional period would lapse and the deal would become null and void.

Incomplete Buyer Vetting:

Buying an assignment requires the assignee to have their mortgage preapproval, as well as their purchase funds available very shortly. If the assignee does not have a mortgage preapproval on hand, it could delay the developer accepting the assignment. If they do not have their funds available it could delay the quick closing as well.

It’s important to thoroughly vet buyers because some builders require the assignor to close in the rare chance the assignee cannot close.

Misunderstanding fees:

Builder’s contracts are not standard forms, and their deposit structures and closing fees can vary from site to site. There are a lot of potential fees when buying and selling assignments and they include, but are not limited to: deposits, seller’s profits, upgrades, lawyer’s fees, interim occupancy rent, utility set-up fees, development levies, realtor commissions, accountant fees, HST, and income taxes. These fees can vary from deal to deal, and when they are payable is different in every assignment. For example, some developers require the homeowner to pay for upgrades when they are chosen, and others charge for the upgrades at final closing.

If you have a preconstruction condo or home that you are thinking of assigning. Feel free to reach out to us for some advice and insight.

Everything you need to know to sell your preconstruction condo assignment

6 important facts to consider when selling a preconstruction condo.

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What You Need to Know About Assignment Sales

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Condo under Construction With CN Tower Near By

What is an assignment sale? We get this question quite often from both investors and end-users when it comes to the Toronto condo market, especially with the dramatic rise in condo buildings and pre-construction sales. Assignment sales can be a great opportunity for everyone involved, from the seller to the buyer. But working with a seasoned real estate broker is one of the most important things you can do. An assignment sale isn’t a typical transaction and there are many things you need to know before moving forward.

What Does an Assignment Sale Mean?

An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller. In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it. Although an assignment sale is possible for both home and condos, it’s much more popular among condo pre-construction buyers.

Why Would Someone Want to Sell Their Condo on Assignment?

With pre-construction condo purchases, the sale of suites typically takes place several years before the building is built. It’s a long time in between buying the suite and actually taking occupancy of it. And with this lag time comes life changes – a new job outside of the city or in a different province, a new family that’s expanding with children, etc. What worked for a particular buyer years ago may not be the current case at closing time.

Financial reasons is also another reason to sell on assignment. Perhaps the purchaser can no longer be able to close on the condo, or perhaps it’s an investor who bought pre-construction with no intention of closing on them, therefore using an assignment sale strategy to profit, based on quick appreciation in the area.

Often with pre-construction sales, there’s a long lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

How Do Assignment Sales Work?

We completed an assignment sale for a client at 87 Peter Street which was a new building that has occupied, but not registered yet. Our client purchased a 1-bedroom, 1-bathroom condo pre-construction for $320,000.00. He was looking to sell the unit on assignment and listed it at $525,000.00. We received an offer of $500,000 which the seller was comfortable accepting.

Typically, when assignment sales takes place, the seller is looking for a buyer who can provide him with a purchase deposit that equals what he had to put down – usually 20% of the original purchase price. After providing the seller with this sum, the deposit paid to the builder now becomes the new purchasers deposit. Any upside to the seller can be paid based on the negotiated terms – sometimes when the seller gets a mortgage for the condo, or even earlier – it’s all based on terms of the assignment deal.

Overall, assignments sales are not to be overlooked – there can be some fantastic opportunities to get into a highly desirable building that you may have missed out on or purchase a condo that you may otherwise not have had access to. But the importance of working with a realtor and lawyer who know the ins and outs of these deals is the key to making them work for you.

If you’re interested in learning more about Assignment Sale and some of the great opportunities currently available, simply fill out the form below – we’ll get in touch right away.

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GTA-Homes » Real Estate Info » Assignments

Assignments

An Assignment Sale in the Pre-Construction Market

Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.

When you purchase a pre-construction condominium unit, you will be given an assignment clause/right in the form of a contract. You can choose to sell your assignment before the condominium is even built.

Assignee/Buyer is not buying a property from Assignor – Assignee is buying the “right” to acquire property from a 3rd party (usually a builder)
Assignor assigns its interest and rights in the Original Agreement with the Builder (or original seller)
Assignor assigns to the Assignee its interest in the original “deposit”
Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement

Once the building has been constructed and registered by the city, the ownership will be transferred to the buyer. Until then, it’s just the sale of a contract, but as you will see, there are many advantages to these kinds of sales for both the buyer and seller.

In this article, you will learn more about assignment sales, why they are used, the process of this transaction and how it can be transferred.

This way, you will be able to determine if an assignment sale is right for you. We at GTA-Homes strive to provide our clients with the knowledge of the pre-construction market, so that they can make a more informed choice when it comes to investing in their future.

An assignment sale can be mutually beneficial for both the buyer and the seller.

See all assignment listings, what you'll learn....

What Is an Assignment Sale?

An Example of an Assignment Sale

Buying an Assignment

Selling an Assignment

Assignments faq.

The Details of an Assignment Sale

What Is an Assignment Sale? Why Do These Kinds of Sales Happen?

There are many reasons why someone might want to sell the rights to their unit before it’s been built. For example, someone may have bought a suite that’s three years away from being completed, but recently had to relocate for a job. This buyer may need to sell their agreement to afford a property in their new city. Another common reason is that a buyer began the purchase process when they were single but during the pre-construction process they married or are now expecting a child. Suddenly they’ve discovered that the pre-construction one-bedroom suite they bought is not big enough for a growing family.

The “ assignment clause ” in the purchase agreement comes in handy when these things happen. It allows the original buyer to pass the contract onto somebody else without accruing financial penalties.

These types of transactions are common and fully legal, but whether you are the buyer or the seller, it’s important to work with both an experienced realtor and lawyer who know how to protect your interests.

These deals are more complex than a conventional resale and involve three parties: the developer, the assignor and the assignee. It’s a two-stage process that involves both interim occupancy and the final closing.

This is just the basics of an assignment deal. There are more details regarding mortgage rules, and other contract details. Keep reading to learn more! Or you can always reach out to talk with one of our agents. We love to talk condos! This is just a general overview, but each arrangement is unique with its own rules, terms, and conditions.

We advise everybody who is thinking of buying or selling a pre-construction assignment to seek advice from a real estate agent, lawyer and tax accountant. Contacting an agent is important because assignors may have to pay a fair amount of tax on any profits they received from the completed sale

Most builders allow assignment sales and you will often see these listings on REALTOR.ca. However, there are some rules in the original purchase agreement that must be followed. They are also more complicated than a regular sale because a mortgage cannot be obtained on the closing of the transaction, only once the building has been registered. Other issues such as occupancy, reimbursement of the seller’s deposits and more must be taken into account.

In 2017, John Smith buys a pre-construction condominium suite from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. The project is set to be completed in 2022.

In 2021, John discovered he will be relocated to a new city. He can’t afford to buy a new home while holding onto his pre-construction condo.

Fortunately for John, the assignment clause allows him to sell the contract for his unit before the building is completed and registered!

John has decided to sell the contract to his unit to Jane Doe. Due to the changes in the market, he was able to sell the contract for $500,000.

Assignment Purchase:

Assignment Agreement: $500,000
Original Purchaser (Assignor) = John Smith
New Purchaser (Assignee) = Jane Doe
Vendor (Builder) = ABC Developments

Assignment Purchase Price by John Smith to Jane Doe = $180,000, due immediately. This includes a deposit of $80,000 + profit $100,000. The amount and timeframe for this payment can also be negotiated.

In 2022 when the building is complete and ready for interim occupancy, Jane Doe will move into the unit during the occupancy period. At this point she will begin paying occupancy fees to the developer. These fees take the place of mortgage payments and condo fees until the building can be registered.
Interim occupancy happens when the city has designated the property as safe to live in. The building will be officially registered once the municipality does a final inspection. Jane Doe can occupy her suite in the meantime until the building is officially registered.

The advantages for buying Assignment Sale

Assignment Details:

When the building is officially registered by the city, the official title transfer takes place between the developer and the new purchaser. Jane Doe can finally register a mortgage and start paying her mortgage payments and condominium fees.
Funds required to complete the sale by Jane Doe to the builder = $320,000
Jane Doe now has all the rights to the property, just like any homeowner. Any future re-sale of the property will consist of a regular real estate transaction.

Is It Worth It to Buy an Assignment?

Assignment purchases can actually give you some of the best deals in the GTA condo market because fewer people typically seek out these types of sales. In addition to fewer buyers, many real estate agents aren’t familiar with the structure of an assignment sale and often won’t bother to advertise these listings. Even lawyers may not know the ins and outs of an assignment sale.

The high demand in the resale market can potentially force buyers into bidding wars, which can cause people to overpay for their suite. Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay much less than you would for a resale unit.

The assignment condo market can be mutually beneficial for both the buyer and the seller. The seller can list their unit without having to wait until the building is completed, and the buyer can save time and potentially thousands of dollars.

Another advantage to buying an assignment agreement is that you will get a brand-new unit that automatically comes with the seven-year Tarion Warranty Program. Let’s not forget that you’ll likely move into the unit sooner instead of waiting the usual 3 to 4 years for the building to be completed!

Let’s Recap Some of the Advantages for Buyers:

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 drop their equity. 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.
Taxes: You may also benefit from saving on taxes like GST and HST.

We love to chat about the assignment sale market, so don’t wait, give us a call and let’s find you a great deal.

Traditionally, owners who wanted to sell their pre-construction units had to wait months or years for the final closing date to officially put their suite up for sale. By this time, they could have already put significant funds into occupancy fees and closing costs.

Assignments sales is not a new strategy in Canada, but compared to other countries where condos have been around much longer, the process is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by saving time and maximizing their profits.

These transactions are becoming increasingly popular. Think of it as a sort of condo flipping. Sellers can transfer their property rights during or before interim occupancy and avoid paying hefty carrying and closing costs, which helps them get their deposits back.

Most builders allow assignment sales, although they often have certain rules that must be followed. Even with strict rules in place, however, there are options available for you.

Let’s Take a Look at the Advantages for Sellers:

Insurance Policy: In the event that your situation changes and you no longer need your unit, you are able to sell your assignment and pull out your equity.
No Carrying Costs: You can avoid paying monthly fees like occupancy fees that can sometimes last for up to two years.
No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.

What is an Assignment Sale?

It is the sale of a contract to purchase a pre-construction unit. This means, instead of selling an already built unit, what’s being sold is the contract or right to acquire the property upon completion. The original purchaser (the "assignor") of a property sells their obligations under the original contract to a new purchaser (the "assignee").

The assignee will generally assume all of the assignor's duties and obligations, such as interest payments, taxes, and maintenance fees during interim occupancy. Upon completion, the assignee is granted the title to the real property and will incur all final closing costs.

Can any kind of purchase agreement involving a real estate transaction be assigned?

Under normal circumstances, any purchase agreement can be assigned, providing the agreement doesn’t prohibit it.

Is an Assignment legal?

It is legally permitted unless prohibited in writing in the original agreement of purchase and sale. In some cases, the developer may charge the assignor a fee for this kind of sale.

Is it necessary to get permission from the developer to assign the contract?

That depends. You need to consult your purchase agreement to get the specifics. Generally developers will not permit an assignment sale without their consent, which means you’ll need to consult with them and a legal representative. There have been incidents where an unauthorized assignment sale has resulted in the original agreement being terminated, and the deposit withheld!

Is there a standard legal form for these types of sales?

Yes, there are two: OREA Form 150 Assignment of Agreement of Purchase and Sale Condominium and OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules.) In most cases, the developer will have their own form as well.

Will either the assignor or assignee’s lawyer services be adequate?

It is essential that the assignor and assignee each retain a lawyer with expertise in this area of real estate.

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

Sometimes. Double check with your builder, as it depends on whether they permit advertising.

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

In the event of a delay, the agreement is still valid. This means the assignee has agreed to take on the agreement and all responsibilities associated with it, including delayed construction or occupancy.

What if the assignee doesn't close?

This is no different than any other property sale, meaning the assignor, in most cases, is not released from the obligations under their original purchase agreement. In this situation, both the assignor and assignee will be liable.

What is the cost of assigning an Agreement of Purchase and Sale?

If the developer consents to the arrangement, there will generally be an administration fee and legal fees. These fees will vary. Consult the original purchase agreement and the developer for specific information.

When does the assignor get their money?

This generally depends on the closing date and the terms of the agreement that the assignor and assignee agreed on. Usually the assignor is paid when:

the assignee takes possession or,
when the developer approves the process, if applicable or,
when the assignee obtains legal title

Who gets the interest, if any, payable by the builder on the original deposits?

Unless otherwise specified, the interest is likely to be paid to the assignor.

Who pays the interim occupancy costs?

Once the assignment is finalized, the assignee will typically pay occupancy costs.

What closing fees are payable?

After the condominium is registered, the builder transfers the ownership title to the assignee. The assignee pays the balance to the builder and any amount still owed to the assignor. Some of the costs the assignor may pay include:

Estimated property taxes for up to 2 years
Hydro/water/gas meter installation and connection charges (approx. $500–$700 per meter)
Development charges/levies (potentially thousands of dollars)
Tarion New Home Warranty (ranging from $600–$1,900. See Tarion website for fee structure)
Discharge of builder’s mortgages (approx. $200–$300 per mortgage)
Builder’s lawyer’s Law Society charge (approx. $70)
Two months of occupancy fees for reserve fund
Other amounts set out in the Agreement of Purchase and Sale

These costs are typically not financed with a mortgage. The assignee is responsible for the following additional fees:

Legal fees and disbursements
Land transfer tax (provincial and municipal)
GST/HST rebate
Municipal levies

If you’re interested in either buying or selling an assignment, you need a realtor who is experienced in finding, negotiating and drawing up the offer for these types of sales. This means you’ve come to the right place! We have a wealth of expertise, knowledge and resources when it comes to assignment sales and we would be more than happy to discuss the idea with you.

Need More Information? That’s What We’re Here For.

Check Out These Helpful Buying / Investing Articles…

Why Pre-Construction Condos Are the Best Investment
Most Frequently Asked Questions
Why Buy With a Platinum Agent
Interim Occupancy and Final Closing
Steps to Buying a Pre-Construction Condo
Renting vs Buying
Condo Investments
Pre-Construction Condo Closing Costs
Pre-Delivery Inspection
Statement of Critical Dates
Condo Project Cancellations
First Time Home Buyer Incentive
Community Benefits Charges
Glossary of Real Estate Terms and Definitions
How Condo Developers Determine Price Per Square Foot
Section 37 Levies
10 Day Cooling Off Period
Development Charges and Levies
Important Documents to Review When Purchasing a Pre-Construction Condo
Land Transfer Tax
Condominium Registration
Condominium Corporations
Condo Reserve Fund
Inclusionary Zoning
Common Elements
Raising Issues With The Condo Board
Condominium Management
Requesting Condominium Records
Meetings and Voting In A Condo Corporation
Condominium Insurance
Renting Your Condo Unit
GST/HST New Housing Rebate
What Are Interest Rates?
Everything You Need to Know about Mortgages
What Is the Ontario New Home Warranty Program?
Deposit Structures for Pre-Construction Condos
What Are Condo Maintenance Fees?
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How Real Estate Pricing Has Changed In the Last Four Decades
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Invest in Real Estate for Wealth and Retirement
The Home Construction Regulatory Authority (HCRA)
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Renting to Student Tenants

Assignment Sale: A Guide

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. The original buyer (assignor) is free of all obligations to the transaction.

Sales of Pre-construction condominiums typically begin years before construction & occupancy. Due to this protracted period of time, scenarios arise in which the original buyer doesn’t need or want the unit.

For example, the buyer may have:

Encountered financial difficulty
Moved to a new city, or
Found a resale property 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, increasing the value of pre-construction units. 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 & secured the base price in the building for himself.

How Does an Assignment Sale Work?

Not all builders will allow assignment sales. This is usually done to prevent “flippers” from purchasing the condo and reselling it prior to closing.

However, builders that allow assignments of pre-construction condos, will usually require that they are paid a portion of the difference.

Assuming the developer permits the assignment to occur, the seller will instruct the buyer to pay a sum of money on or before closing of the transaction. This sum is usually the difference between what the seller contracted to pay for the unit originally, and the amount that the seller has agreed to assign for.

The Seller then provides the buyer and developer with a “Direction Regarding Title”, allowing the property to be placed into the name of the new owner at the point of closing.

A prudent seller, when assigning a condominium, will also require the buyer and developer to sign a release which absolves the seller of all further liability.

Assignment Sales: More Than Just Condos.

Its important to remember that a buyer could assign ANY contract with a provision to do so. Resale homes, multi-residential investments, and condos, both pre and post-construction can all be assigned prior to closing.

This is important to understand when selling a home. A purchaser could sense an opportunity and contract your property with provisions for assignment. They could then assign the property to another buyer for a higher amount and pocket the difference.

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 Us for more information regarding Assignment Sales and the pre-construction condo world.

Baron Alloway

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AssignToday Blog

10 Essential Things To Know About Real Estate Assignment Sale (For Sellers)

What is an assignment.

As the name implies, an assignment is when the original buyer of a property gives up their rights to that contract and assigns it to another buyer (Assignee).

An assignment is different from a sale of property because in a sale both parties (the seller and buyer) are involved; and in an assignment, the seller transfers their rights, interest and benefits under their contract to another buyer. The seller can assign their contract before or after closing day.

When does someone need to assign a real estate purchase contract?

When should you assign your contract?

If you are unable to complete the purchase of a property for whatever reason, but would like to move forward with another buyer and give them an opportunity to buy the property at an agreed upon price, then an assignment may be right for you. Some common reasons why someone might need to assign a real estate purchase contract include:

Financial hardship due to job loss or sudden illness
Move to different city/ country
Personal reasons like marriage, children or birth of newborn
Death or incapacitation of the original buyer
Loss of financing
Original buyer looking to sell off to earn profit (speculative buying)

Is it legal to assign a contract?

The short answer is yes, it’s legal to assign contracts. However, there are certain things you need to know about how this process works before you decide whether or not you want to go through with it.

The first thing you should know is that assigning a contract isn’t a casual decision—it’s a legal document. When you sign an assignment agreement, you’re entering into an agreement with another party (the buyer) where they agree to take over your responsibilities under the original contract.

The second thing worth mentioning here is that while assignments aren’t necessarily uncommon occurrences––especially when dealing with multiple parties––they can be tricky because they often involve changing hands during different stages of closing proceedings which can make things unnecessarily complicated sometimes if not done correctly or thoroughly enough beforehand

How do assignments work?

An assignment is a transfer of a seller’s interest in the contract. In other words, it’s when a buyer assigns their rights under a contract to someone else. This can happen before closing or after closing and both scenarios have different implications for the original buyer (the assignor), as well as the new buyer who has taken over their position (the assignee).

Here’s how it works: The assignor transfers his or her interest in the contract to another person—this is known as an “assignment.” In order for this transfer to take place legally, four conditions must be met:

Both parties must agree on how much money will be exchanged between them;
Any existing obligations between either party must be transferred over without interruption;
All future obligations that arise from signing onto this agreement must also be transferred over without disruption;
And finally, if there are any fees associated with making this switch then those need to be paid

Are there any restrictions on assignments of purchase contracts?

The answer, in a nutshell: No.

The law does not restrict assignments of purchase contracts. In other words, if you want to assign your contract to another buyer or seller, you can do so freely and without penalty—as long as both parties have signed the contract and the sale has closed (or gone into escrow).

Can I assign my purchase contract to anyone?

The answer to this question is a resounding Yes.

You can assign your contract to anyone you like, as long as they meet the seller’s requirements for buyers.

For example, if your purchase contract requires that buyers have good credit and that they put down 20% in earnest money, then only someone who meets these criteria will be able to take over your contract.

So, who might assign their purchase contract? Here are some examples:

Family members
Friends (or friends-of-friends)
Real estate agents (particularly agents who specialize in assignments)

Can the buyer and seller agree to set a price for the contract assignment before it happens?

The answer is Yes, but it’s not necessary or recommended.

The reason is that once an assignment has been documented, there are no further negotiations between the buyer and seller on that contract. So there’s no need for any further discussion about price in advance of closing (unless you want to include some kind of non-binding agreement).

If you want to see what your property might sell for when it comes time to assign your contract, talk with an agent who specializes in negotiating contracts after they have already been signed by both parties.

What happens to deposits paid by the original buyer (the assignor)?

The deposit is usually returned to the assignor.
The deposit is sometimes not returned to the assignor (typically if the buyer was a good one)
The deposit is always returned to the original buyer if that person is still in contract with you and wants to take over as their own private party sale (PPS).

How do I find an end buyer for my property assignment?

There are several ways you can find an end buyer for your property assignment:

Ask your real estate agent. Your agent should know of buyers interested in purchasing assignments, or at least be able to refer you to someone who can help.
Ask your real estate lawyer (or real estate broker). Your attorney may also be able to refer you to a buyer’s attorney he or she knows and trusts personally, many lawyers have clients looking for properties like yours all the time
Submit Your Assignment on Assign Today. Post your property on AssignToday.Com , lot of buyers are looking to take advantage of assignment sale via our website.

If you’re thinking of buying and selling a pre-construction home, you should understand how real estate assignment sales work.

In short: An assignment sale allows buyers who have already put down their deposits on a property to transfer their contract over to another buyer.

This means that while they are still legally obligated to complete the deal, they can make a profit by selling their right to buy the home at its current market value.

The seller will then go ahead with the original sale and collect an additional commission for facilitating this transaction.

While this might sound like an easy way for sellers to make money off of homes that haven’t sold yet (and potentially even get paid twice), there are some things you should keep in mind before taking advantage of real estate assignment sales yourself: you should connect with the Real Estate Professional who specializes in buying and selling preconstruction homes.

Meghna Negi

What Is an Assignment Sale? Understanding the Ins and Outs of This Real Estate Process

An assignment sale occurs when the original buyer of a property (the assignor) transfers their rights and obligations of the property contract to another buyer (the assignee) before the official closing of the sale.

This process allows the assignee to step into the original purchaser's shoes, taking on the commitments of the property purchase, which could be a pre-construction condo, house, or any other form of real estate.

Now, let's delve deeper into understanding how assignment sales work, their intricacies, and what they mean for buyers and sellers in the real estate market.

Demystifying the Elements of an Assignment Sale

Embarking on a real estate journey often introduces many terms and processes that may seem complex at first glance, with 'assignment sales' leading the pack in complexity and confusion.

Whether you're the original buyer looking to navigate away from closing costs or a savvy purchaser hunting for a valuable investment, understanding the nuts and bolts of assignment sales is an invaluable asset in the dynamic landscape of real estate.

How Assignment Sales Work

Assignment sales introduce a unique dynamic in real estate transactions, particularly in bustling markets like Vancouver Island and the Sunshine Coast .

When you buy a pre-construction unit, the property is yours, albeit not immediately ready for occupation. Life changes or financial circumstances sometimes evolve between the original purchase agreement and the final closing, necessitating a shift in plan.

Here's where assignment sales come into play. The original buyer can sell their interest in the property before the final sale, sidestepping typical hurdles like mortgage payments or land transfer taxes that come with a regular sale. This method provides a strategic avenue for purchasers to hand over their contractual obligations to another party without waiting for the property's completion.

The Assignment Clause: A Vital Cog in the Wheel

The assignment clause in the original contract is central to these types of transactions. This clause allows the transfer of the buyer's rights and responsibilities to another person.

It's crucial to understand that not all pre-construction sales agreements have an assignment clause, and most builders or developers might impose restrictions or require consent before any assignment deal can proceed.

Understanding the Financials: Costs and Fees

Engaging in assignment sales tends to involve several costs that both the buyer and seller must anticipate.

These include the assignment fee charged by the developer, legal fees for contract transfer, and possibly higher legal fees due to the complexity compared to a resale property. There could also be tax implications depending on the nature of the transaction and the parties involved.

Navigating Through the Interim Occupancy Period

A common scenario in assignment sales, especially in pre-construction condos, is dealing with the interim occupancy period.

This period arises when the assignee can take possession (though not ownership) of the unit while the property is not officially registered. During this phase, the assignee pays occupancy fees, akin to rent, which don't go towards mortgage payments.

Understanding this period helps both parties make an informed decision and prepare for the financial responsibilities it entails.

The Pros and Cons of Assignment Sales

Navigating assignment sales requires a balanced understanding of its advantages and drawbacks. While these transactions open avenues for lucrative deals and flexible arrangements, they also carry inherent risks and complexities that can impact buyers and sellers.

This exploration will provide clear insights, aiding your decision-making in the vibrant real estate market.

The Bright Side: Benefits of Assignment Sales

Less Competition, More Opportunities: One advantage that makes assignment sales attractive, particularly in areas prone to bidding wars like Vancouver Island , is less competition. Fewer buyers are willing or informed about engaging in this kind of sales transaction, reducing the frenzy often seen in hot real estate markets. This situation can present a more favourable buying environment for those ready and willing to proceed with an assignment purchase.
Potential for a Better Deal: For buyers, assignment sales sometimes offer the opportunity to get into a brand-new unit at a potentially lower cost. Since the assignee is stepping into an existing agreement, they might benefit from the original purchase price, which could be lower than current market rates, especially in fast-growing communities.
Flexibility for the Original Buyer: For the original buyer, an assignment sale offers a way out, potentially recouping the deposit paid and avoiding financial penalties that might come with breaking a purchase agreement. This strategy can be particularly advantageous if the purchaser's circumstances change and needs to free up cash or avoid taking on a mortgage.

The Flip Side: Challenges and Risks of Assignment Sales

Complexity and Higher Legal Fees: Assignment sales are not your straightforward real estate transaction. They require additional steps, such as securing the developer's consent, and the legal process is more complex than purchasing resale properties. As a result, both parties might incur higher legal fees to facilitate the transaction.
Financial Overheads and Closing Costs: For the assignee, the initial cost outlay can be substantial for the assignee. They must reimburse the original buyer's deposit, pay the assignment fee, cover land transfer taxes, and prepare for other closing costs. These expenses require careful consideration and financial planning.
Uncertainties and Marketing Restrictions: In some cases, developers impose marketing restrictions, making it challenging to advertise the assignment sale. Additionally, the assignee, now the new buyer, takes on certain risks like development charges or changes in market conditions, which could affect the property's value upon final closing.

Making the Move: Deciding If an Assignment Sale Is Right for You

Deciding to engage in an assignment sale is a pivotal moment, requiring a blend of financial foresight and market understanding.

As we delve into this decision-making process, we'll consider critical personal and economic factors that ensure you're making a choice that aligns with your real estate ambitions and lifestyle aspirations.

Conduct Due Diligence: Know What You're Getting Into

Involving real estate agents experienced in assignment sales is a prudent step for guidance through the intricacies of these transactions.

Also, consulting with a real estate lawyer ensures you understand the legalities, your rights, and any potential liabilities you might be assuming.

Consider Your Financial Standing and Long-Term Goals

Reflect on your current financial health and future plans.

For original buyers, if life changes dictate a change in your real estate investments, an assignment sale could be a viable exit. For potential assignees, consider whether this buying pathway aligns with your investment strategy and if you're comfortable with the associated risks.

Stay Informed About Market Conditions

Market dynamics greatly influence real estate valuations. A clear picture of current trends, especially in your buying area (like Fort St John or cities in the Okanagan ), helps make an informed decision.

Understanding these trends could offer insights into whether you're setting yourself up for a profitable investment or a potential financial misstep.

Bringing It All Home with LoyalHomes.ca

Navigating the world of assignment sales can be a complex journey, laden with opportunities and pitfalls. Whether you're considering selling your contractual rights or stepping into an existing purchase agreement, the route is layered with legal, financial, and market considerations.

At Loyal Homes, we understand that your real estate journey is more than just a transaction; it's a pivotal chapter in your life story. We're here to guide you through each step, ensuring you're equipped with the local, accurate, and relevant information to make decisions confidently. Our team is committed to providing a service that stands a notch above the rest, focusing on relationships and community at its core.

Ready to take the next step in your real estate adventure in British Columbia? Whether it's finding the perfect neighbourhood, exploring investment opportunities, or seeking your dream home, we're here to assist.

For a personalized experience tailored to your unique needs, consider our Personalized Home Search . If you're on the selling side and need to understand your property's current market standing, request a Free Home Valuation . Or, for any other inquiries or guidance, feel free to contact us . Your journey to a successful real estate experience in British Columbia starts with LoyalHomes.ca, where your peace of mind is our highest priority.

Frequently Asked Questions

Is it good to buy an assignment sale.

Buying an assignment sale can be advantageous, offering lower purchase prices compared to current market rates for similar properties, especially in hot real estate markets. However, this venture also requires thorough due diligence to ensure that the agreement terms, property details, and financial implications align with your investment goals.

Can You Make Money on an Assignment Sale?

Yes, there is a potential to make money on an assignment sale, particularly if the property's value has increased since the original purchase date. This profit occurs due to appreciation over the period, especially in high-demand areas, but it's crucial to factor in any assignment fees, legal costs, and tax implications to understand the net gainfully.

What Are the Risks of Buying an Assignment Sale?

The risks include a lack of guarantees on the final product as specifications might change, potential delays in construction, and complexities in financing, often requiring a more substantial initial deposit. These elements underscore the importance of legal counsel to navigate contract specifics and to prepare for any contingencies or additional costs.

How Do I Sell My Pre-Construction Assignment?

Selling a pre-construction assignment involves marketing to potential buyers, typically requiring the developer's consent and possibly entailing a fee. Engaging with a real estate professional who understands the local market nuances and legalities of assignment sales is essential to ensure a smooth, compliant transaction.

Do I Pay Tax on Assignment Sale?

Tax implications on assignment sales can be multifaceted, potentially involving income tax on profits and GST/HST on the purchase, depending on factors like the property type and the seller's tax status. It's advisable to consult with a tax professional to accurately determine specific obligations and strategize for tax efficiency based on your circumstances.

What Is the Difference Between a Transfer and an Assignment?

A transfer and an assignment differ significantly; a transfer involves changing property ownership after a project's completion, whereas an assignment sells one's interest in a property before it's finished. Understanding this distinction is crucial as it affects the contractual obligations, rights transferred to the new buyer, and the legal and financial processes involved in the transaction.

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The Condo Assignment Process: Everything You Should Know

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September 15, 2018 | Selling

Condo assignment sales are different from typical pre-construction transactions. Whether you’re on the buyer or seller side, the condo assignment process is unique—which is why you should take the time to learn about the costs, timelines, and other specifics involved.

If you’re thinking about buying or selling a condo on assignment, here’s what you should know…

What is a condo assignment sale.

An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don’t technically own their unit (which may not be completed yet), what they’re really selling is their purchase agreement with the builder.

The concept sounds simple. However, there are some ins and outs that both sellers and buyers should know to ensure that their transaction is legally above board—and in their best interests.

Seller FAQs

Thinking of selling your pre-construction condo on assignment? Here are some answers to the most commonly asked questions sellers have about the process.

Should I sell my condo on assignment?

Pre-construction buyers often sell condos on assignment as part of an investment strategy. That said, there are other instances where going this route makes sense.

Maybe your lifestyle has changed, and the unit you were excited about a year ago is no longer ideal. Perhaps you’re facing some financial challenges, and you need some cash in the short term. Whatever your circumstances, a real estate agent with condo expertise can help you decide if selling on assignment is right for you.

What are the tax implications of selling on assignment?

While there’s nothing wrong with assignment sales, some Canadian investors have gotten themselves in hot water for making them without paying taxes on their profits. Regulators have been cracking down on these transactions, which is why knowing your taxation responsibilities is crucial.

The bottom line? If you’re making an assignment sale, it’s best to speak with a financial expert before moving forward.

Does the builder need to be involved?

Your Agreement of Purchase and Sale will specify whether selling your condo on assignment is permitted. Either way, you should obtain consent beforehand. There’s a very good chance that builder approval of an assignment sale is a condition in your contract—so read it carefully.

How much will it cost to sell on assignment?

If the builder signs off on your sale, you’ll probably still have to pay a fee. This sum could range from a few hundred dollars to several thousand, and in some instances it is waived by the developer. You should also be aware that, along with the regular costs associated with selling, your legal fees may be higher than they would be for a simpler transaction.

Will I get my deposit back?

A purchaser who is buying on assignment (also known as an “assignee”) usually pays the assignor their full deposit. As part of a typical deal, you should receive the amount you’ve paid to date, sometimes along with your profit, on closing day.

How can I find a buyer?

Be aware that there are marketing restrictions placed on most assignment sales. While it depends on the terms of your agreement with the builder, you probably won’t be able to post on the MLS or online.

If you market your assignment in violation of your contract, the builder may be able to cancel your agreement—and hold onto your deposit. For this reason, working with an agent who knows the local condo market is your best bet for finding a buyer.

Are you thinking of purchasing a pre-construction condo on assignment? Read answers to some of the most common questions buyers have first.

When is buying a condo on assignment a good idea?

If you’re excited about a particular condo development that has no remaining inventory, buying on assignment could be your way into the building. In many cases, the price for a unit is lower when it’s sold this way than it would be if it were on the market as a resale unit.

On the flip side, assignment sales tend to be more complicated than traditional condo transactions. They often entail costs, risks, and legal minutiae that aren’t part of conventional resale and pre-construction purchases.

An agent with condo market expertise can help you weigh the pros and cons of including assignment sales in your condo search.

Can I renegotiate the terms of the agreement in place?

No. When you buy a condo on assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to (and take on any potential risks associated with them). For this reason, it’s very important that you protect your interests by working with an experienced real estate lawyer.

Fortunately, you may be able to negotiate with the seller (or “assignor”) regarding the specifics of your purchase with them. Assignors are often in the midst of a life transition, and they may be eager to make a deal and move on.

Which costs will I pay?

Along with the sum you’ve agreed to, you will almost certainly be expected to pay the assignor the amount they’ve put towards their deposit to date. Unless your contract specifies otherwise, you will be responsible for final closing costs including (but not limited to) land transfer taxes, development fees, Tarion fees, and HST if applicable.

As part of the assignor’s original agreement, development charges may be capped. If this is the case, you could wind up spending significantly less money—so it’s worth looking into.

How will closing work?

Closing on an assignment sale can be complicated for the assignee. You’ll have to go through the process twice: once when your deal is finalized with the assignor, and again when you close with the builder. During the first closing, you’ll pay the assignor their deposit and sometimes the profit. The profit portion could be renegotiated and paid on the second closing. During the second, you’ll pay the developer the remainder of what’s owed.

Don’t forget about the occupancy period! Once your unit is fit to be occupied, you will pay a sum that’s approximately equal to your monthly mortgage payments and condo fees until the building is registered.

What else should I know?

In addition to understanding the assignment process, you should be aware of the pros and cons that go along with buying a pre-construction condo. Your purchase will come with certain risks that the original buyer was willing to take on—such as delays to closing. On the flip side, there’s nothing quite like moving into a beautiful, brand new condo.

When handled correctly, condo assignment sales can be beneficial to buyers, sellers, and developers. Just remember that understanding the process is the key to success—which is why working with the right real estate and legal professionals is so important!

Interested in buying or selling a pre-construction condo? Let’s discuss it! Call or shoot me a text at 416-500-5360, or email me at [email protected].

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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

Click the banner below to take a 90-minute online training class and get started learning how to invest in today’s real estate market!

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What Is Assignment Sale And How Does It Work?

What are the benefits of assignment sale (2020 update).

Many may have heard of the term assignment sale but are unfamiliar with how it works.

Let’s take a closer look at precisely what assignment sales are and what’s involved in buying or selling an assignment.

A real estate sale is between two parties transferring the ownership of physical property for a predetermined amount.

However, there are instances where transactional activities occur during the pre-construction phase of a property. Such actions are known as assignment sales. It is possible when the right to buy a property is sold to another individual before completion of the construction.

Assignment sales are most often seen in the condominium market as it is common for the builder to sell out their inventory early on in the development. Still, the units continue to be high in demand. The sale allows new buyers to be given opportunities to own an interest in the units still if specific individuals decide to sell their assignment.

When an offer is made on a pre-construction condo unit, an Agreement of Purchase & Sale would be signed by the original purchaser. The agreement would include an Assignment Agreement Clause stipulating the right to assign the contract to another under certain conditions. Mainly, this permits the original purchaser, or the Assignor, to sell their obligation to purchase the property to another individual, or the Assignee. The Assignee would be the one to complete and close the final sale with the builder.

As participants of an assignment transaction, there are several key factors to consider. In the next section, you’ll see the benefits of buying or selling an assignment.

Buying an Assignment

In a seller’s market, buyers may often find themselves in a bidding war. And end up paying for a significantly higher price. Instead of pursuing this route, buying an assignment can be an excellent alternative as relatively speaking. There is less competition for these properties, which can lower the cost for the buyer.

The assignment of a property has been around in the real estate industry for quite some time. Yet it is not widely known.

This is often due to the marketing restrictions that are usually in place. They prevent assignments from being advertised on popular platforms such as the Multiple Listing Services (MLS®).

With that said, having an agent knowledgeable in this area is crucial as they can open doors to homes that may never otherwise be known. This gives buyers a larger pool of saleable homes with less competition to choose from.

Buying an assignment can also lead to possessing the property quicker than purchasing a pre-sale unit. When an assignment is available for sale, construction is often already well underway, meaning the time to occupancy is shortened. Depending on what stage the development is in, the Assignee can still be able to personalize the unit by choosing their finishes, appliances, and other upgrades to the unit.

The Assignee will be responsible for settling the deposit as well as any profit or loss to the Assignor. Moreover, the Assignee will be liable for the full purchase amount at completion, along with the terms and conditions that are written in the original contract.

Selling an Assignment

With pre-construction sales, there is usually a long period before the unit is ready for occupancy. By going through the process of an assignment sale, the Assignor can get out of their contract without having to endure the mortgage process and incur the closing costs to resell the property.

From an investor’s perspective, the benefit is that not only can the Assignor receive their original deposit back, they also can negotiate with the Assignee for a higher price. With today’s increasing demand for condos, many investors lock in their profits from an assignment sale and use it towards their next investment opportunity.

Continuing a series of profitable transactions.

Assigning the contract can also save investors the interim occupancy fees for a unit they never plan to live in.

Aside from investors, assigning the contract is also an excellent option for individuals who initially plan on settling in the new unit but encounter situations where lifestyle changes affect their ability to fulfill the obligations of the purchase.

As an example, a young couple may be expecting a newborn. Making the unfinished condo unit too small for their growing family. The option to sell the unit before completion. It can allow them to acquire their proceeds back more swiftly. Than if they waited for the condo to be built to be resold in the market.

Thus, assigning the contract to another interested party would release the Assignor from all purchase obligations. As long as the original purchase contract allows for assignments and the new purchaser can satisfy both the details of the agreement and financial qualifications, most builders would approve.

However, the seller of the assignment will need to be aware of building assignment fees that are well documented in the purchase contract. Also, there may be restrictions that prohibit assignments to be marketed on popular platforms. Doing so would be a breach of contract resulting in the loss of the deposit.

How We Can Help

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 who understands the intricacies of assignment sales so that they can guide you seamlessly through the process. Contact JOVI Realty today if you’re interested in learning more about assignment sales.

Source: https://jovirealty.com/what-is-assignment-sale-and-how-does-it-work/

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What you need to know about buying an assignment condo

An assignment sale isn’t a typical real estate transaction and there are many important factors you need to know before buying an assignment condo. Regardless of the market conditions, assignment condos are usually difficult to sell, in part because they have much higher upfront requirements than regular sales. For the same reason, it presents a great opportunity for a buyer to purchase without facing overwhelming competition. Below is what you need to know about buying an assignment condo.

What is an assignment sale?

An assignment sale is a transaction in which a buyer (the “Assignor”) has purchased a property and then sells their interest in that property to another buyer (the “Assignee”) prior to the property closing. Essentially, the Assignor is not actually selling the property; they are selling their contract along with the rights and obligations of the original agreement with the Builder or original seller. While it is possible to have an assignment sale of a pre-construction house or a resale property, assignment sales in Toronto are most common in pre-construction condos.

The assignor is the original buyer of the condo unit in the pre-construction phase. In an assignment sale, the assignor is the seller.

The assignee is the buyer of the assignment condo and takes over all rights and responsibilities of the original contract.

Cons of buying an assignment condo

You, as the buyer (assignee), require a substantial amount of cash in order to buy an assignment condo. Typically in the range of 30% to 40% of the purchase price, see the cost breakdown below for details.
You may be approved for a mortgage when you make the purchase of an assignment condo, but the transaction closes much later. While you can occupy your unit prior to the final closing in the interim occupancy phase, you only get your final mortgage approval at the final closing. The interim occupancy phase may last for many months and requires you to pay the interim occupancy fee ( Tarion provides a great explanation on interim occupancy ). If your financial circumstances change in this period you could have a hard time getting a mortgage.
Usually, there is only one assignment sale permitted. So you cannot resell the condo until the final closing and registration of the building.

Pros of buying an assignment condo

You can buy a brand-new condo without having to wait many years for it to complete.
There is usually a good amount of inventory to choose from and you can get a better price than comparable resale properties. This is especially important if the market is super hot, as there is less competition.
You don’t have to worry about a project being canceled, leaving you out to dry. Once assignments are allowed by the builder, the building is usually already well underway.

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Costs Breakdown

Payment terms vary from one agreement to the next but the chart below will give you some insight.

Assignments and renting

If you are buying an assignment condo in order to rent it out be sure to mention that to your lawyer. The builder’s contract may have very specific conditions concerning when and if you can rent the unit out during the interim occupancy period. Also, the builder may not qualify for a portion of the HST rebate if you’re an investor. However, subject to certain limitations the assignee may qualify for an HST rebate after closing. To get exact details on this I would strongly recommend speaking to a lawyer and an accountant before you start searching for assignment condos.

All assignment sales should be conditional upon your lawyer reviewing the entire assignment agreement. Part of that will be all of the contents and disclosures of the original agreement of purchase and sale between the Assignor and the builder.

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Assignment Sale FAQ

The most detailed assignment sale guide in canada, most frequent questions and answers.

In order to understand what an assignment sale is, we’ll need to touch on pre-construction properties. Buying a pre-construction property means that you purchase a property before it’s ready, sometimes even before its construction has even begun. Building developers usually start pre-construction sales early on, meaning you can buy a condo in a coveted building and desirable area for a fairly reasonable price (sounds impossible, right?) – but here’s the catch, it won’t be ready for a couple of years. The upside is that it will most likely have appreciated in value by the time you receive it, making it a smart investment. As soon as you buy a pre-construction property, you are entering an agreement with the builder until the property is ready.

Now an assignment sale is when the original buyer of a pre-construction property sells their contractual interest in the property to a new buyer, meaning that they resell the pre-construction property before taking possession of it. The sale must be done before the original buyer takes registered possession of the home for it to be considered an assignment sale. As such, the second buyer (the purchaser of the assignment sale) is the one who completes the transaction with the original seller (the builder). To put it simply, it’s basically a purchase of the agreement between the builder & the original buyer, so that the new buyer automatically becomes the new owner of the property once it’s completed.

Since we’ve covered the assignment sale basics, let’s get more technical – the property being sold is still not registered with the land registry office and is probably still under construction. This makes it quite different from a regular sale, in more than one way. Let’s get into the main attributes that make this type of purchase unique.

When purchasing a property via assignment sale, there is usually a larger than normal deposit. The deposit in an assignment sale takes into consideration the deposit paid by the original buyer to the builder (usually 20%), plus additional profit that the seller is hoping to gain. Since the original buyer (now the seller of the agreement) is making a profit on the property above the downpayment already paid, these assignment sales can be very cash intensive – this is the single biggest deterrent for most buyers.

For instance, Buyer A purchases a pre-construction property from the developer of the project (the builder) for $500,000. Buyer A pays a 20% deposit ($100,000) over a two year span to the builder. Before the project is completed, Buyer A decides that they are no longer interested in going through with the purchase and would like to sell the unit, at this point (two years later) the market price of the property has now reached $550,000. Buyer A lists the unit for sale for $550,000, and the new buyer (Buyer B) would have to pay Buyer A their original deposit of $100,000 (20%), plus the property’s appreciation of $50,000. The total deposit that Buyer B will have to pay is $150,000 which, at this point, would be higher than the 20% usually required to obtain a mortgage on an investment property.

Another factor to keep in mind is that the assignment sale cannot take place without the builder’s consent. If you’re thinking of buying a pre-construction property only to then re-sell it as an assignment sale and turn a profit, this is definitely a factor worth considering. The builder reserves their right to hold back on consent for assignment sales and most only allow one assignment to be completed prior to final closing.

Therefore, as the buyer in an assignment sale, you’ll only be able to take over the original purchase agreement between the builder and Buyer A with the consent from the builder. This usually entails the builder requiring mortgage approval documents, ID, and additional information from the new buyer. Then there would be an assignment agreement executed between the builder, original buyer, and you (the new buyer). Needless to say, this is not the case with a regular sale – in a regular sale, the only consent you will need is that of your own and the seller.

Adding to the growing list of factors that make the assignment sale process different, showings do not exist here. Since, in most cases, an assignment sale is done before the building is even ready, the buyer is unable to physically see the property before purchasing it. As the buyer in an assignment sale, you’d be able to see floor plans, mock-ups, and images. In some cases, you’d also be able to head to the builder’s sales center and see/touch the finishes (eg. kitchen cabinets, countertops, tiles, appliances, etc.). You may also see the status of construction of the building by visiting the development site, to get an idea regarding the stage of project.

Since this requires a lot of trust, we recommend doing your research on the city’s reputable builders & the neighbourhood of the development to make sure its the right for you. It’s worth noting, however, that if the assignment sale is taking place during occupancy – when the original buyer has occupied the unit but is not yet in full possession of it – you might be able to see the unit in person.

Within the process of an assignment sale, you’ll find that there is additional paperwork (Builder’s consent, assignment agreement, etc.) and stages (occupancy closing, final closing, etc), which in turn leads to more legal hours. Lawyer fees for these types of sales are usually higher than a traditional sale because there are more contractual technicalities involving more than one party (Buyer A, the builder and Buyer B). Our advice would be to discuss these fees with your lawyer, in order to paint a more accurate picture of the what you can expect.

When buying a property via assignment sale, you are essentially buying a pre-construction property through a third party (Buyer A). With pre-construction properties, you get physical possession of the home (known as occupancy) before you get full possession of the home on paper (known as final closing). Therefore, occupancy fees are fees that you have to pay from the time you get possession of the home (occupancy phase) until the time you take official title of the property (final closing). Final closing usually occurs after the building is completed and has reached a certain percent of total occupancy. At final closing is when you would your mortgage would kick in. During the occupancy phase, you can expect the occupancy fees to be roughly the same amount as your mortgage payments would be with 20% down.

To add to what seems like the never-ending fine print, you might come across a number of additional fees when it comes time for final closing. Most contracts with a builder state that the buyer might incur additional costs that will only be specified upon final closing. The main additional fees are levies charges, also known as development costs; these are costs that the builder incurred while constructing the building, which they pass on to you as the buyer.

The size of these fees really depends on more than one factor: the builder, the city, and the project are a few to list. However, in most cases, you may have the builder set an upper cap limit on these fees – also known as Capped Levies. That way you know that the additional charges will be have a maximum upper limit that they wont exceed. Typically in Toronto, most developers cap development charges for one bedrooms to $7,500, $15,000 for two bedrooms, and over $20,000 for three bedrooms but please keep in mind that these are just ballpark numbers and the exact capped amount varies.

It’s essential to look at the original agreement between the assignment seller and the builder to see if levies are capped and at what amount. If the levies are not capped, you will have to assume the risk of higher-than-anticipated closing costs at the time of taking title to the property. Of course, there are also the common costs associated with homeownership which include land transfer taxes, legal fees, and possible mortgage fees.

Last but not least, it’s critical to consider HST (Harmonized Sales Tax) when buying via assignment sale, which essentially means you’re purchasing a pre-construction property. As a buyer, the HST of 13% in most cases is actually already included in the purchase price of the pre-construction property and the builder then applies for their rebate. However, it’s important to touch on the fact that buying a pre-construction property solely for investment may alter this structure.

If you are purchasing the property solely as an investor, and neither you or a direct family member will be occupying the unit, then you would have to pay the HST at final closing and apply for the New Residential Rental Property Rebate (NRRPR) after leasing the unit for one year. For more information regarding qualifications and the amount of the rebate, visit this publication from the CRA.

If you’re purchasing the assignment for yourself and it will be used as a primary resident then you’ll have to confirm that the HST is included in the purchase price of the assignment. For more information you may also visit the CRA’s info sheet here.

When it comes to HST and the status of your occupancy, you should always consult with your accountants and lawyers as each circumstance is unique.

Well, after much unbiased consideration, it’s safe to say that purchasing/selling on assignment can be a win-win scenario for both parties – the assignment seller gets a price above purchase price and the buyer, in most cases, snags a property below market price. Since assignment sales tend to occur well into the construction phase, there’s also less risk imposed on the buyer in an assignment sale. That being said, there are a number of reasons why a person might want or need to sell/buy a property on assignment:

Selling Reasons:

Change of plans: since pre-construction homes can take years to be completed, the original buyer situation could have changed within that time. For example, the original buyer may have started a family and is now looking for a larger, more suitable home.
Financial trouble: the financial situation of the original buyer may have changed over the years, and they’re now put in a position to have to sell the property. For example, the original buyer may have lost their job, meaning they can’t get qualified for a mortgage and are now unable to complete the purchase.
Profit: it’s very common for investors to buy pre-construction homes with the aim of re-selling them to turn a profit. This is usually a common scenario for assignment sales in the Toronto real estate market.

Buyer Reasons:

Brand new building/area: it can simply be that the purchaser is looking for a property that has never been occupied, or is in a newly developed neighbourhood, or just wants to secure a property in a new, buzz-worthy development. An example of this is Nobu Toronto.
Below market price and less competition: since these purchases require at least 20% down-payment, in most cases it could be that these units have less competition and can be purchased at somewhat of a bargain.
Profit: again, investors also look to buy properties via assignment sale because they believe that the building or neighbourhood will continue to appreciate in value, and come time of total completion or a few years later they would be able to sell for higher.

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What is a Condo Assignment Sale? — Everything You Need to Know

What is a condo assignment sale, when does it occur.

Condo assignment sales occur before the final occupancy or closing date of a new construction property. An assignment sale occurs before the final closing of the property between the original purchaser (Assignor) and the builder.

As a new purchaser of an agreement, you are going to assume everything that the original purchaser agreed to in their original contract. For this reason, it is important to appoint a lawyer by your side to go over two important set of agreements. The first one is the agreement between the original purchaser and the builder. Lawyer will walk you over red flags or things like closing costs associated to the unit – remember you have to assume these terms. The second piece of agreement the lawyer will look at is the new agreement between the original purchaser (Assignor) and the new purchaser (Assignee)

Reason for a Condo Assignment Sale

Assignment sales take place with all sort of new construction product such as townhomes, detached homes, condos, stacked townhomes & more. Why do these kinds of sales happen? The most common reason is the original buyer’s circumstances might change and present a reason to list their condo for assignment sale transactions.

There are many reasons why one would decide to sell their unit on assignment since the gap of purchase time to occupancy is wide and can take 2-7 years depending on what type of property it is. Perhaps they will welcome a new member of their family soon and the condo just isn’t big enough for everyone. Whatever the reason, it isn’t always negative. It is important to work with professionals that can guide you throughout the process of an assignment sale.

Costs of Condo Assignment Sales

Is selling an assignment better than a regular real estate transaction? Yes. Being the seller (assignor) is known to contain more tax fees than a unit that is already built and you’ve taken title of. As a buyer of an assignment, you do not need to observe such fees and a professional can walk you over your closing costs associated to the transaction.

Now that you know what is a condo assignment sale, you can therefore make an informed decision. We get a lot of questions about new condos and whether it’s better to wait or to list them for assignments right away.

An assignment is better if you’re looking to get your money back sooner rather than later. Assignments will also see that the assignee pays the land transfer taxes and other taxes. Sometimes you can even make a profit on the market value if condo assignments are listed during a real estate boom.

It all sounds great, but selling condo assignments also has its drawbacks. For example, experienced real estate agents know it’s more difficult to sell an assignment property due to a much smaller buyer pool. Most assignment sales cannot be advertised online on platforms such as MLS.

In most cases,, there are marketing limitations when it comes to selling an assignment which can hurt your chances of finding a potential buyer

If you are looking for a new home sooner rather than later, an assignment sale offers closer occupancy dates, unlike purchasing something new that will only be ready in 5 years. In some cases, you may still have a chance to choose your own colours and finishes of the unit

Pros and Cons of Condo Assignment Sales for Buyers

As a buyers, you can expect to see advantages such as more options when choices are low. Since assignments are more complex, you typically face less competition on deals whereas in a hot market you may be in a bidding war scenario.

Pros and Cons of Condo Assignment Sales for Sellers

The pros for assignment sellers are a shorter list compared to the ones for buyers. First of all, sellers can get their money faster and put that amount to good use such as reinvestment. Sellers will not be responsible for carrying costs such as occupancy fees or go ahead with the mortgage payments or other closing fees.

At times, the seller can also play the market and list the unit for higher than the original purchase price and make a profit. However, more often than not, sellers will have a harder time seeing offers due to marketing restrictions and a smaller buyer pool.

Since the process for assignments is also much more intricate, it will be difficult to find a real estate professional out there that is familiar with this type of sale. For this reason, an assignment transaction can come with more complexity and would require additional knowledge.

Now that you know what is a condo assignment sale, you can decide if it’s the route you want to take as a buyer or seller. There are more advantages from a buyer’s standpoint, but there are undeniable pros for sellers such as getting your money back faster and avoiding closing costs.

Looking for assignment sales? Here are some top options on the market:

Stockyards District Residences
Whitehaus Condos
St. Lawrence Condos
Westwood Gardens
One Burrard Place
Cascade City
ALPHA at LUMINA Brentwood
University District
Sun Towers 1
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Theatre District Tower
Go2 Condominiums
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Artworks Tower
859 West Condos
Park Boulevard
567 Clarke + Como
The Maverick
Etoile Condos
Concord Brentwood Hillside West Tower 1
Canvas Condos
Mississauga Square Condos
Mirabella Luxury Condos
Wesley Tower
Home (Power + Adelaide)
Oro at the Edge
5 North Condos
Gore Park Lofts
Casa Di Torre
in.DE Condos
Mobilio Condos
One Crosstown
Cypress at Pinnacle
The Cardiff
Social Condos
Millhouse Condos
Cedar Creek
King George Hub at the Stations
Sussex Metrotown
Sweetlife Condos
7 on the Park
Saturday in Downsview Park
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Sugar Wharf Condos
Verdé Condo
Liberty Central by the Lake
Lighthouse Tower
Scala Condos
AVRO Condos
Perla Towers
DuEast Condos
Vita on the Lake
Playground Condo
Junction House Condos
Downsview Park
Peter & Adelaide Condos
75 on the Esplanade
Panda Condo
Wish Condos
Park Avenue Place
159SW condos
Riverview Condos
Distrikt Trailside Condos
Lake & Town
B-Line Condos
Lumina Condos
Nobu Residences Toronto
Yonge + Rich
The West at Stationwest
Transit City 4 Condos
1 Yorkville
Oak and Co. Condos
Four Sixteen Condos
Evermore Condos
Transit City Condos
Gallery Square Condos
Auberge on the Park
M City Condos 2
Empire Phoenix Condos
Mirabella Condos

Pages are worth reading:

The boom of condos in Toronto
The assignment sale when buying condos
The assignment sale in Toronto
The great apps for real estate agents

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Assignment Definition

Investing Strategy , Jargon, Legal, Terminology, Title

What Is an Assignment?
What is an Assignment in Real Estate?
What Does it Mean to Assign a Contract in Real Estate?
How Does a Contract Assignment Work?
Pros and Cons of Assigning Contracts

REtipster does not provide legal advice. The information in this article can be impacted by many unique variables. Always consult with a qualified legal professional before taking action.

An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property.

The assignment method is a standard tool in a real estate wholesaler’s kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own money to profit from a deal.

Contract assignment is a common wholesaling strategy where the seller and the wholesaler (acting as a middleman in this case) sign an agreement giving the wholesaler the sole right to buy a property at a specified price, within a certain period of time.

The wholesaler then finds another buyer and assigns the contract to him or her. The wholesaler isn’t selling the property to the end buyer because the wholesaler never takes title to the property during the process. The wholesaler is simply selling the contract, which gives the end buyer the right to buy the property in accordance with the original purchase agreement.

In doing this, the wholesaler can earn an assignment fee for putting the deal together.

Some states require a real estate wholesaler to be a licensed real estate agent, and the assignment strategy can’t be used for HUD homes and REOs.

The process for assigning a contract follows some common steps. In summary, it looks like this:

Find the right property.
Get a purchase agreement signed.
Find an end buyer.
Assign the contract.
Close the transaction and collect your assignment fee.

We describe each step in the process below.

1. Find the Right Property

This is where the heavy lifting happens—investors use many different marketing tactics to find leads and identify properties that work with their investing strategy. Typically, for wholesaling to work, a wholesaler needs a motivated seller who wants to unload the property as soon as possible. That sense of urgency works to the wholesaler’s advantage in negotiating a price that will attract buyers and cover their assignment fee.

RELATED: What is “Driving for Dollars” and How Does It Work?

2. Get a Purchase Agreement Signed

Once a motivated seller has agreed to sell their property at a discounted price, they will sign a purchase agreement with the wholesaler. The purchase agreement needs to contain specific, clear language that allows the wholesaler (for example, you) to assign their rights in the agreement to a third party.

Note that most standard purchase agreements do not include this language by default. If you plan to assign this contract, make sure this language is included. You can consult an attorney to cover the correct verbiage in a way that the seller understands it.

RELATED: Wholesaling Made Simple! A Comprehensive Guide to Assigning Contracts

This can’t be stressed enough: It’s extremely important for a wholesaler to communicate with their seller about their intent to assign the contract. Many sellers are not familiar with the assignment process, so if the role of the buyer is going to change along the way, the seller needs to be aware of this on or before they sign the original purchase agreement.

3. Find an End Buyer

This is the other half of a wholesaler’s job—marketing to find buyers. Once they find an end buyer, the wholesaler can assign the contract to the new party and work with the original seller and the end buyer to schedule a closing date.

4. Assign the Contract

Assigning the contract works through a simple assignment agreement. This agreement allows the end buyer to step into the wholesaler’s shoes as the buyer in the original contract.

In other words, this document “replaces” the wholesaler with the new end buyer.

Most assignment contracts include language for a nonrefundable deposit from the end buyer, which protects the wholesaler if the buyer backs out. While you can download assignment contract templates online, most experts recommend having an attorney review your contracts. The assignment wording has to be precise and comply with applicable local laws to protect you from issues down the road.

5. Close the Transaction and Collect the Assignment Fee

Finally, you will receive your assignment fee (or wholesale fee) when the end buyer closes the deal.

The assignment fee is often the difference between the original purchase price (the price that the seller agreed with the wholesaler) and the end buyer’s purchase price (the price the wholesaler agreed with the end buyer), but it can also be a percentage of it or even a flat amount.

According to UpCounsel, most contract assignments are done for about $5,000, although depending on the property and the market, it could be higher or lower.

IMPORTANT: the end buyer will see precisely how much the assignment fee is. This is because they must sign two documents that show the original price and the assignment fee: the closing statement and the assignment agreement, respectively, to close the transaction.

In many cases, if the assignment fee is a reasonable amount relative to the purchase price, most buyers won’t take any issue with the wholesaler taking their fee—after all, the wholesaler made the deal happen, and it’s compensation for their efforts. However, if the assignment fee is too big (such as the wholesaler taking $20,000 from an original purchase price of $10,000, while the end buyer buys it for $50,000), it may ruffle some feathers and lead to uncomfortable questions.

In these instances where the wholesaler has a substantially higher profit margin, a wholesaler can instead do a double closing . In a double closing, the wholesaler closes two separate deals (one with the seller and another with the buyer) on the same day, but the seller and buyer cannot see the numbers and overall profit margin the wholesaler makes between the two transactions. This makes a double closing a much safer way to conclude a transaction.

Assigning contracts is a way to lower the barrier to entry for many new real estate investors; because they don’t need to put up their own money to buy a property or assume any risk in financing a deal.

The wholesaler isn’t part of the title chain, which streamlines the process and avoids the hassle of closing two times. Compared to the double-close strategy, assignment contracts require less paperwork and are usually less costly (because there is only one closing occurring, rather than two separate transactions).

On the downside, the wholesaler has to sell the property as-is, because they don’t own it at any point and they cannot make repairs or renovations to make the property look more attractive to a potential buyer. Financing may be much more difficult for the end buyer because many mortgage lenders won’t work with assigned contracts. Purchase Agreements also have expiration dates, which means the wholesaler has a limited window of time to find an end buyer and get the deal done.

Being successful with assignment contracts usually comes down to excellent marketing, networking, and communication between all parties involved. It’s all about developing strategies to find the right properties and having a solid network of investors you can assign them to quickly.

It’s also critical to be aware of any applicable laws in the jurisdiction where the wholesaler is working and holding any licenses required for these kinds of real estate transactions.

Related terms

Double closing, wholesaling (real estate wholesaling), transactional funding.

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Assignment Sales in Canada: What You Need to Know as a Buyer

Closing cost in Ontario

What Does an Assignment Sale Mean? An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller. In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it. Although an assignment sale is possible for both home and condos, it’s much more popular among condo pre-construction buyers. here some important Frequently asked questions about Inspection.

Assignment Sales

Why Would Someone Want to Sell Their condos on Assignment? With pre-construction condo purchases, the sale of suites typically takes place several years before the building is built. It’s a long time in between buying the suite and actually taking occupancy of it. And with this lag time comes life changes – a new job outside of the city or in a different province, a new family that’s expanding with children, etc. What worked for a particular buyer years ago may not be the current case at closing time.

How Do Assignment Sales Work? We completed an assignment sale for a client at 87 Peter Street which was a new building that has occupied, but not registered yet. Our client purchased a 1-bedroom, 1-bathroom condo pre-construction for $320,000.00. He was looking to sell the unit on assignment and listed it at $525,000.00. We received an offer of $500,000 which the seller was comfortable accepting. Additionally Click here for know about Tax Exposure.

Typically, when assignment sales takes place, the seller is looking for a buyer who can provide him with a purchase deposit that equals what he had to put down – usually 20% of the original purchase price. After providing the seller with this sum, the deposit paid to the builder now becomes the new purchasers deposit . Any upside to the seller can be paid based on the negotiated terms – sometimes when the seller gets a mortgage for the condo, or even earlier – it’s all based on terms of the assignment deal.

If you’re interested in learning more about Assignment Sale and some of the great opportunities currently available, Contact us if you’re looking for a Pre-construction condo in the GTA .

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6 Tips to Consider When Buying New Condos on Assignment Sales

As far as new condos for sale in Toronto are concerned, purchasing a pre-construction unit is quite common. Sometimes, it also consists of entering into a contract for assignment sales. Before we discuss how to handle such transactions, let us understand the meaning.

What is an Assignment Sale?

An assignment sale refers to the sale of a contract stating the purchase of a pre-construction condominium unit. It indicates that since the building has not been registered, no one can take or transfer the title of the condo. However, you can sell the contract. Once the builder registers the building, you could sell the property and along with the title.

The assignment clause of the contract comes in handy when you have purchased a new pre-construction condo but have to sell it before the completion of construction due to reasons such as relocation. It protects you from accruing any financial penalty.

Tips to Make Buying a New Condo on Assignment Sales Easier

Assignment closing date - when your assignment sale transaction with the original home buyer is completed.
Occupancy closing date - the first closing date when the buyer gets the condo’s key from the builder.
Final closing date - is when the title of the property will transfer to the buyer’s name.
An assignment closing date when purchasing a new unit is usually before or after the Occupancy Closing date.
It is Not Like Purchasing A Resale Condo Buying an assignment sale unit lets you acquire the title from the original customer. It does not refer to buying the condo itself. You will get the ownership of the unit only after the Final Closing Date which is why it is not like a resale purchase.
You will be responsible for the 20% down payment paid by the original purchaser to the builder.
You will also have to pay the difference amount between the current asking price or the new purchase rate of the condo and its original value.
Consent of the Builder is Essential The builder’s approval is required to complete the transaction of assignment sales. In some instances, they may not agree if the date of assignment sale is around the final closing date. This is because the builder would want to make sure that there are no confusions as to the final name on the contract.
Mortgage Approval For the builder to approve the transaction, you must provide Proof of Sufficient Funds to indicate that you can afford the purchase. The amount eligible for a mortgage is equal to the original purchase price less the down payment paid to the builder.
Do Not Be in a Hurry Since purchasing a new condo requires a substantial amount of investment, it is essential that you consider all the aspects before entering into a sales contract.

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What Is An Assignment Sale?

Jun 10, 2022 | Investors

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Assignment sales are becoming more prevalent with all of the new construction going on in the province, particularly in the GTA. What does it mean?

Imagine you purchased a property that hasn’t been constructed yet. It could take years before you move in, and your life could change significantly in the meantime. What happens if you no longer want or need the home or condo that you’ve committed to purchasing?

That’s Where Selling On Assignment Comes In

An assignment of an Agreement of Purchase and Sale with a builder is when the existing Purchaser (referred to as the Assignor) decides to sell their right to purchase the subject property to someone else (a new Buyer, referred to as the Assignee) before they close on the purchase with the builder .

It’s a transferring of the rights to fulfill the contractual obligation with the builder from the Assignor to the Assignee who will be the new purchaser and subsequent owner of the property. An assignment sale takes place before the title (ownership) has been transferred.

Why Assignment Sales Can Be Tricky

Most builders won’t allow an assignment unless the build is nearing completion or even in the occupancy period. It varies on what the builder’s rules are pertaining to assignments, if they allow them at all.

You can find out by reading the original builder purchase agreement and checking in regarding any updates as to whether they’re ready to allow assignments to take place.

Any kind of real estate transaction can get complicated, but knowledge of the market will help you. Here are some of our other topics you might want to know about:

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When selling an assignment, the Assignor seeks to recover the deposits they’ve paid to the builder, which is typically 20% of the original purchase price on the builder’s agreement. Plus, they will be owed the difference between their original purchase price and the current market price.

In an ideal scenario for the Assignor (original purchaser), the full payment of funds owing from the Assignee (new purchaser) is usually due upon the assignment closing date. This is the completion date of the purchase between the Assignor and the Assignee. It could be within 30 – 60 days from the accepted offer or until the builder provides the approval to assign and the appropriate documents are completed between the parties to the transaction (Builder, Assignor and Assignee) to transfer the purchase of the property to the Assignee.

The assignment closing date is not the occupancy date or the builder closing. It’s a separate agreement between the two parties for the assignment purchase.

A Simplified Breakdown of an Assignment Sale:

The original purchase price was $450,000
The Assignor paid a 20% deposit to the builder, which is $90,000
Over time, the value of the property has grown and the parties have agreed to a current market value purchase price of $580,000, an increase of $130,000 from the original purchase ($580,000 minus $450,000)
The Assignor wants the recoup their original deposit, $90,000, plus the difference in value, $130,000.
The total amount of funds owing to the Assignor from the Assignee in consideration of the Assignment agreement is $220,000
The Assignee is required to close on the purchase with the Builder based on the original purchase price, which is separate from what they would owe the Assignor to buy the property from them under an assignment agreement

When Do You Have to Pay?

As with purchasing any property, few people have the available capital to pay everything upfront.

Sometimes, the Assignor may agree to receive a partial payment upon the assignment closing date. The remainder is then due on the final closing and can potentially be rolled into the Assignee’s mortgage.

If the Assignee has the funds and agrees to pay upfront, the Assignor in some cases may allow for some negotiation on the assignment purchase price. Since the Assignor no longer has to worry about receiving payment, less risk is involved.

What Are the Pros of Buying on Assignment?

It allows you to buy a brand new product in an otherwise sold-out development
You can obtain the property at ‘today’s market price’ before housing prices increase
Some Assignors may be motivated to sell for personal reasons, which could mean getting a better purchase price

What Are the Cons of Buying on Assignment?

The closing costs are higher. When you buy on assignment, you take over all terms in the original purchase agreement. You’re now responsible for the builder’s closing costs, including developmental charges, levies and other miscellaneous fees, which can amount in the thousands. This is in addition to the Land Transfer Tax and real estate lawyer fees which can be a bit higher for an assignment sale as it requires the lawyer to review the original builder purchase agreement in addition to advising on the assignment agreement which is more complex then a standard resale purchase and sale. When you buy resale, you pay the land transfer tax and the real estate lawyer’s fees for a standard real estate purchase. Closing costs cannot go into the mortgage, so you need the cash upfront.
You may have to pay HST on the purchase. Sometimes, the builder includes the HST in the purchase price and applies for the rebate on your behalf. However, you are not eligible for an HST rebate unless the purchase will be your principal residence. Taxes can get complicated, and you should consult with a lawyer and accountant to protect yourself.
You typically will require more money for the purchase upfront because of the amount the Assignor is looking to recoup.
Not all lenders will approve the mortgage financing based on the new purchase price for an assignment purchase, although today most of the major banks do. You will need a mortgage pre-approval specifically for the assignment purchase and as per the terms that the builder requires for the length of time the mortgage approval is valid, which is typically a longer period than a typical mortgage pre-approval
Your choices are limited when buying on assignment. You can not choose the floor height, exposure, or preferred floor plan layout.
You do not get to choose the finishes. You have to accept whatever colour palette and style of finishes the Assignor selected. However, the builder often has a design team who would have had a few preselected colour pallette options for the original purchaser to have chosen, so you’ll know that the finishes will complement each other and not be unappealing otherwise

Once you’ve bought your condo, one of the first things you’ll want to do is decorate and make it your own. Here is a simple idea to get you started!

Who Should Buy On Assignment?

In our opinion, an assignment is good for those who have enough cash to make this type of purchase without financial strain. Buying an assignment may allow you to get a pre-construction property that may otherwise be unavailable.

You’ll also likely get a better price than what the market value may be by the time the build has been completed and is registered.

If you’re thinking of buying or selling on assignment, it’s important not to try to do it alone. It doesn’t have to be intimidating. In fact, buying or selling on assignment could work well given your personal circumstances. Your best resource is to have a Realtor and lawyer who are knowledgeable about pre-construction and assignments.

Do you have more questions about buying or selling on assignment or real estate in general? You can set up a meeting with us here , and we can point you in the right direction. Did you find our blog post ‘What Is An Assignment Sale’ informative? We have sold many assignment properties over the years and know the in’s and out’s of selling on assignment. Contact us today if you have a property to sell on assignment – with our proven success strategies we’ll get to work on a successful assignment sale of your property in Toronto and the west GTA.

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COMMENTS

10 Things To Know About Assignment Sales in Real Estate
An assignment is when a Seller sells their interest in a property before they take possession - in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren't actually selling the property (because they don't own it yet) - they are selling their promise to purchase it ...
A Comprehensive Guide To Selling Your Assignment Condo
An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. Preconstruction condo assignments are prevalent because of the time lag between purchasing the home and the move-in date. While condo ...
What Is An Assignment Sale & How Does It work?
Are there any advantages of purchasing an assignment? Is it better than buying a resale? This video is your comprehensive guide on assignment sales. You'll l...
What You Need to Know About Assignment Sales
An assignment is a sales transaction where the original buyer of a property (the "assignor") allows another buyer (the "assignee") to take over the buyer's rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property).
Real Estate Definition: Assignment Sale
What is an Assignment Sale? An assignment sale refers to a sales transaction in which the original buyer of a property ("assignor") transfers their rights and obligations of the Agreement of Purchase and Sale to another buyer ("assignee") before the original buyer takes possession of the property. The assignee then becomes responsible ...
Is Buying a Home on Assignment a Good Idea?
Buying a home on assignment offers a number of advantages including reduced wait times to move into a brand new home, lower purchase price vs resale and less competition from other buyers during sellers markets. The waiting period for an assignment home is shorter than pre-construction. When buying a home on assignment, typically the builder ...
Assignment sales 101
An assignment sale is a lot more complicated than a resale purchase. You need a real estate lawyer experienced in assignments to ensure everything is done right, and a realtor who really understands the assignment market. Seller pros.
What is an Assignment Sale?
An assignment sale is the sale of a contract to purchase a pre-construction condominium suite before it is built. Learn the benefits, process, and advantages of this type of transaction for both buyer and seller. See examples, documents, and fees involved in an assignment sale.
Assignment Sale: A Guide
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.
10 Essential Things To Know About Real Estate Assignment Sale (For
An assignment is different from a sale of property because in a sale both parties (the seller and buyer) are involved; and in an assignment, the seller transfers their rights, interest and benefits under their contract to another buyer. The seller can assign their contract before or after closing day.
What Is an Assignment Sale? Understanding the Ins and Outs of This Real
Understanding the Ins and Outs of This Real Estate Process. An assignment sale occurs when the original buyer of a property (the assignor) transfers their rights and obligations of the property contract to another buyer (the assignee) before the official closing of the sale. This process allows the assignee to step into the original purchaser's ...
Condo Assignment Sales: Everything You Need to Know
An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don't technically own their unit (which may not be completed yet), what they're really selling is their purchase agreement with the builder. The concept sounds simple. However, there are some ins and outs that both sellers and buyers ...
What Is Assignment Sale And How Does It Work?
An Assignment sale is basically the sale of a contract for purchasing pre-construction condo suites as well as freehold properties. An assignment sale is usually applicable to non-registered pre-construction condos and freehold properties. Before we dive deeper into the topic, it's important to understand some of the terms that are used in ...
Assignment of Contract In Real Estate Made Simple
A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home.
What Is Assignment Sale And How Does It Work?
The sale allows new buyers to be given opportunities to own an interest in the units still if specific individuals decide to sell their assignment. When an offer is made on a pre-construction condo unit, an Agreement of Purchase & Sale would be signed by the original purchaser. The agreement would include an Assignment Agreement Clause ...
Buying an assignment condo
An assignment sale is a transaction in which a buyer (the "Assignor") has purchased a property and then sells their interest in that property to another buyer (the "Assignee") prior to the property closing. Essentially, the Assignor is not actually selling the property; they are selling their contract along with the rights and ...
Assignment Sale Explained
The sale must be done before the original buyer takes registered possession of the home for it to be considered an assignment sale. As such, the second buyer (the purchaser of the assignment sale) is the one who completes the transaction with the original seller (the builder).
What is an Assignment Sale [2021]: Agreement Purchase Involved & More
A condo assignment sale is the purchase of a contract from someone else before the final occupancy or closing of a new construction property. It offers benefits and risks for buyers and sellers, such as faster closing, lower fees, and more options. Learn more about the process, costs, and examples of condo assignment sales in Canada.
What Is An Assignment Of Contract In Real Estate?
The real estate assignment contract is also known as the assignment of purchase and sale agreement. This is a separate legal document from the original contract. The real estate assignment contract has the terms of the assignment, such as who is the assignor/assignee, when the payment is taking place, and real estate closing terms.
What Is an Assignment in Real Estate?
An assignment or assignment of contract is a way to profit from a real estate transaction without becoming the owner of the property. The assignment method is a standard tool in a real estate wholesaler's kit and lowers the barrier to entry for a real estate investor because it does not require the wholesaler to use much (or any) of their own ...
Assignment Sales in Canada: What You Need to Know as a Buyer
We completed an assignment sale for a client at 87 Peter Street which was a new building that has occupied, but not registered yet. Our client purchased a 1-bedroom, 1-bathroom condo pre-construction for $320,000.00. He was looking to sell the unit on assignment and listed it at $525,000.00. We received an offer of $500,000 which the seller was ...
6 Tips for Buying Condos on Assignment Sales
Tips to Make Buying a New Condo on Assignment Sales Easier. Assignment closing date - when your assignment sale transaction with the original home buyer is completed. Occupancy closing date - the first closing date when the buyer gets the condo's key from the builder. Final closing date - is when the title of the property will transfer to the ...
What Is An Assignment Sale?
An assignment of an Agreement of Purchase and Sale with a builder is when the existing Purchaser (referred to as the Assignor) decides to sell their right to purchase the subject property to someone else (a new Buyer, referred to as the Assignee) before they close on the purchase with the builder. It's a transferring of the rights to fulfill ...
Just Sold Off Market Presale Assignment ️ 1 ...
homesbyhayreApril 3, 2024 on : " Just Sold Off Market Presale Assignment ️ 1 Bed 1 Bath 488 SQ. FT Congrats to my sellers on the sale of their..." 💥Just Sold Off Market💥 Presale Assignment 🛏️ 1 Bed 🛁 1 Bath 📐 488 SQ.

10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

What’s an assignment?

Do assignments only happen with pre-construction condos?

Why would someone want to assign a condo?

What can be negotiated in an assignment sale?

Builder Approval and Fees

Marketing Restrictions

What are the tax implications of real estate assignment?

How much does it cost to assign a pre-construction condo?

How does the closing of an assignment work?

Assignments vs. Resale: Which is Better?

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The Lourantos Group

A Comprehensive Guide To Selling Your Assignment Condo

What is a preconstruction condo assignment sale?

The Builder’s Role In Assignments:

How do you sell an assignment condo?

Important Dates:

What Is Negotiable During An Assignment Sale:

Conditions In Assignment Sales

Here’s an example of selling an assignment for profit vs selling an assignment for a loss:

What Does It Cost To Sell An Assignment condo:

Taxes due on an assignment sale:

Is it better to sell an assignment or wait till the condo is ready?

The most common mistakes when selling an assignment:

Poor communication/understanding:

Ignoring deadlines or dragging your feet:

Incomplete Buyer Vetting:

Misunderstanding fees:

If you have a preconstruction condo or home that you are thinking of assigning. Feel free to reach out to us for some advice and insight.

Everything you need to know to sell your preconstruction condo assignment

6 important facts to consider when selling a preconstruction condo.

What You Need to Know About Assignment Sales

What Does an Assignment Sale Mean?

Why Would Someone Want to Sell Their Condo on Assignment?

How Do Assignment Sales Work?

Assignment Listings

An Assignment Sale in the Pre-Construction Market

An assignment sale can be mutually beneficial for both the buyer and the seller.

An Example of an Assignment Sale

Selling an Assignment

The Details of an Assignment Sale

What Is an Assignment Sale? Why Do These Kinds of Sales Happen?

Assignment Purchase:

Assignment Details:

Is It Worth It to Buy an Assignment?

Let’s Recap Some of the Advantages for Buyers:

Let’s Take a Look at the Advantages for Sellers:

What is an Assignment Sale?

Can any kind of purchase agreement involving a real estate transaction be assigned?

Is an Assignment legal?

Is it necessary to get permission from the developer to assign the contract?

Is there a standard legal form for these types of sales?

Will either the assignor or assignee’s lawyer services be adequate?

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

What if the assignee doesn't close?

What is the cost of assigning an Agreement of Purchase and Sale?

When does the assignor get their money?

Who gets the interest, if any, payable by the builder on the original deposits?

Who pays the interim occupancy costs?

What closing fees are payable?

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Assignment Sale: A Guide