What is an Assignment Sale?
An assignment sale occurs when the original buyer (known as the "assignor") transfers their rights and obligations under a purchase agreement to a new buyer (the "assignee") before the property is completed and ownership is officially transferred. Essentially, the assignor sells their contract to purchase the property rather than the property itself.
This type of transaction is common with pre-construction properties, such as condominiums or homes still under development. The assignor hands over their interest in the property to the assignee, who assumes all responsibilities and benefits outlined in the original agreement.
How Do Assignment Sales Work?
Initial Purchase Agreement:
The assignor signs a purchase agreement with a developer or seller, outlining terms like price, payment schedule, and completion date.
Finding an Assignee:
The assignor identifies an interested buyer (assignee) willing to take over the contract.
Negotiation:
Both parties negotiate the terms of the assignment sale, including any premiums or fees.
Drafting the Assignment Agreement:
A formal Assignment Agreement is prepared, transferring the assignor's rights and obligations to the assignee.
Developer Consent:
The developer's approval is typically required for the assignment. They may charge a fee and review the assignee’s qualifications before granting consent.
Notification and Legal Recognition:
Once approved, all parties, including the developer and original seller, are informed. This step ensures the transaction is legally recognized.
Completion of the Purchase Agreement:
The assignee fulfills the remaining terms of the original purchase agreement, including payments and the closing process once the property is ready.
Benefits of an Assignment Sale
For the Assignor:
Financial Flexibility: Recover the initial deposit and costs incurred.
Avoid Closing Costs: Skip fees like land transfer taxes and legal costs tied to final ownership.
Potential Profit: Sell the contract at a higher price if the property's value has appreciated.
For the Assignee:
Access to High-Demand Properties: Purchase units that may have sold out during the initial sales phase.
Faster Occupancy: Shorter wait times compared to buying directly during pre-construction.
Cost Savings: Potentially buy at a lower price than the current market value due to motivated sellers.
Drawbacks of an Assignment Sale
For the Assignor:
Market Risks: Unfavourable market conditions may lead to selling at a loss.
Complex Process: Legal and administrative steps can be intricate.
Smaller Buyer Pool: Assignment sales typically attract fewer buyers than resale properties.
For the Assignee:
Upfront Costs: Cover the assignor’s deposit, any premiums, and additional fees.
Limited Customization: Options for altering or personalizing the property may be restricted.
Uncertainty: Risks include construction delays, market changes, or project-related issues.
Is an Assignment Sale Right for You?
Whether you’re buying or selling, assignment sales offer unique opportunities and challenges. For personalized guidance, give me a call at 416-909-6497 to navigate the process with confidence.