Buying an Assignment
With the explosion of condo developments in Canada today, more and more assignment transactions are also taking place. For real estate investors who have bought condo units few years back and whose requirements have changed, this is a great opportunity to sell even before getting charged with closing costs like uncapped developer levies and land transfer tax. And for home buyers who want a new condo right away or for individuals who cannot find a property in the current resale market, assignments are awesome selections and potential money savers.
An assignment is the transfer of a contract before occupancy. It means taking over the contract of the original buyer with the developer. What happens is that you pay the amount equivalent to the original buyer’s deposit plus the purchaser’s profit (difference between the original price from a few years back and current selling price). As soon as the condo is ready for occupancy, the new buyers are able to move in immediately. A buyer also needs to be pre qualified by a mortgage broker before drafting an assignment contract.
Purchasing a Condo Assignment: Quick Tips
Aside from these tips, it would be wise to home buyers to seek legal advice and professional real estate advice before entering into any contract.
Know whether an assignment is permitted under the property’s purchase contract. There are a few developers which do not allow assignments. Others may need consent and charge fees.
Review the Disclosure Statement and other relevant documents related to the sale.
Get realtor advice or legal advice before deciding to go for such contracts.
Consider all options, like whether the deposit and lift are paid to the assignor during the signing of agreements or kept in trust for a later date. It would be better if money is released only after the unit is finished and title is transferred.
Check in the assignment agreement how the assignor meets the requirements for a valid assignment and find out what happens if there is a breach.
An original buyer purchases a condo in 2006 for $400,000 and paid $100,000 for down payment. In the year 2007, he sells the property to another party for $500,000. To buy the assignment, the new buyer must pay the following to assume the contract:
Different in assignment price from its original price
As soon as the property is read y for occupancy, the assignee or new buyer completes the sale and undergoes the same terms with the original sale agreement. In cases, where the assignee isn’t able to complete the transaction, the developer can go after its original buyer. It is advisable to seek legal advice on this.