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.
Buyer FAQs
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 rashid.notash@rogers.com.
