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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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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.

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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.

Related posts.

6 important facts to consider when selling a preconstruction condo.

Everything you need to know to sell your preconstruction condo assignment

Assigning Real Estate Contracts: Everything You Need to Know

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. 3 min read updated on February 01, 2023

Updated July 10, 2020:

Assigning real estate contracts refers to a method of earning money from buying and selling real estate. You find a seller who is eager to sell their property at a price that is far below its market value. Then, you find a buyer willing to pay a higher price for it.

How Contract Assignment Works

The first thing you need to do for contract assignment is to find a motivated seller. This is a person who owns a property, and for some reason, needs to sell in a hurry. This is generally because of a problem they are having, such as needing to move to a new home quickly. You'll need to be able to tell the difference between this sort of seller and someone who isn't in so much of a hurry to sell, and perhaps just wants to know what the property is worth.

You can find motivated sellers by placing ads in the newspaper, marketing on the internet, or sending direct mail. A combination of strategies works best.

The next thing you need to do is to obtain an assignment contract document. You can find templates on the web, but it's a good idea to have an attorney look it over before signing anything. That way, you will know that everything is completely legal. You will also be able to use that attorney if things don't work out as planned.

After the contract is signed, you submit it to a title company or an attorney who handles real estate closings . They will then do a title search. This ensures there are no existing liens against the property. This step is crucial because you do not want to buy a property that has a problem with the title. The title company is objective and independent and therefore makes sure everything is fair and legal.

At this point, you may search for a buyer. This will require more marketing strategies and can be a difficult process, but when you do find a buyer, you can move on to the next step - closing on the property. You'll need to collect a non-refundable deposit known as “earnest money” to make sure the buyer won't back out. If the buyer does change their mind, you get to keep the earnest money. This amount can be determined by you or the buyer.

Next, you get paid! The amount you receive will cover the amount you agreed to pay the property seller, along with an amount you get to keep in return for finding the buyer and making the transaction happen.

While this process takes place, you should make sure the seller understands how the process works , and that you will make a profit from the transaction. Otherwise, either the seller or buyer may decide they don't like the idea of your profiting from the sale and may back out. Reassure the seller that they are still getting the amount agreed upon for the sale.

Most contract assignments are done for $5,000 profit or less, but you can do it for a higher amount if you choose. If problems arise, it's possible to do a double or simultaneous closing, thereby keeping both parts of the sale separate and anonymous. Some title companies may not agree to do this, so if it becomes an issue, you should discuss it in advance.

Drawbacks of Contract Assignment

Contract assignment, or wholesaling, can be a  profitable venture , but there are a few pitfalls to watch out for, such as:

• You cannot make any repairs or renovations to the property because you do not own it at any point.
• You cannot offer any type of financing to the buyer.
• You must get the sale accomplished within a short amount of time before the contract expires.
• The process of closing on the property is detailed and can be complicated.
• You must find a buyer who is willing to pay in cash because it's hard to find a lender who will approve a mortgage for an assigned contract.

You also need to check the laws in your state, because in some states it is not legal to market a property that you don't own.

If you need more information or help with assigning real estate contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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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.

• Photo: @ irina88w via Canva.com
• Photo: @ AndreyPopov via Canva.com
• Photo: @ putilich via Canva.com

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08 Sep 2011

What is an Assignment Sale and how do Assignments work?

Here’s how the assignment sale works in toronto real estate.

You may have heard the term “Assignment Sale” lately as it has become really popular with speculative condo investors.

Assignment Sales are defined as follows: The Assigning or Selling of your rights to purchase a property.

To clarify, you’re not actually selling the property. Since the Assignor (Seller) hasn’t taken possession yet (usually because it’s not built or has not registered yet), they are simply assigning the rights to the Assignee (Buyer).

Here’s an example: If I walked in to a condo sales centre,  signed and bought a pre-construction unit from the floor plans I would have the right to purchase said unit when it was constructed and registered. An Assignment Sale is when I take that paper that I signed, my right to purchase, and sell it to someone else; The Assignee, for a certain amount. To break it down, if I agreed to buy the condo for $300,000, then found a Buyer aka Assignee, the Assignee has the right to purchase said unit for $300,000 but he/she has paid me a premium on top of the $300,000 for that right.

A client just went through one of these for a condo that he had bought pre construction. He, as usual, got in over his head with purchases and decided to assign a unit in order to free up some cash to make the deposits on another place that he had purchased pre construction. After spending some time spreading the word and marketing the property I received a call from a colleague saying he had a buyer for me and we eventually made the deal happen. Here is how I structured the deal to make it work for my client:

He had paid $356,400 for this unit (I should say, he had agreed to pay that amount when it was ready a year or so from now).  He had made initial deposits of $53,750 , or 15% of the purchase price. My goal was to recover as much of that now for my client. Next, the buyer aka Assignee agreed to purchase said unit from my client for $380,000 . What this means is that he will eventually purchase the unit from the developer for $356,400 but give my client $23,600 for the right to do so (Total to the Buyer is $380,000).

So now the Assignee owes the initial deposit $53,750 plus the built in profit of $23,600 all totaling $77,350. Most people don’t have that kind of money lying around but since the money was needed right away we worked out a plan where he would pay the initial deposit of $53,750 now (borrowed from his parents) and the remainder of the cash from his mortgage when the condo was built and ready to register. We were lucky because the Assignee had the ability to come up with the cash.

Sometimes when the Assignee doesn’t have the option of paying out the Assignor it can be agreed that all the money will be transferred when the condo is ready and registered. An Assignor would likely agree to the latter only if the profit margins are much higher and the money is not needed right away. In this case since my client needed to be paid out now he accepted the small profit and was able to cash out and pay for his most recent purchase.

Assignment Sales, unlike resale transactions can get quite complicated. It is very important that you have an experienced Spring Realty Broker to work out the contract and an experienced real estate Lawyer to help mitigate risk for the client. I have been involved in hundreds of Assignment Sale transactions and with the help of Feld/Kalia Team of lawyers we get the job done right. Contact Us to get started.

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5 Real-Life Sales Scenarios Where You Need Assignment Selling (w/ Templates)

For many, assignment selling is a game-changing solution to one of the biggest sales peeves: answering the same customer questions again and again. 

Not only is it monotonous, but it eats up valuable time for both sales rep and buyer. 

That's why it's valuable to use assignment selling — that is assign content to your prospects ahead of a sales call — to set yourself up for more productive conversations with better-fit prospects.

Putting content to work for sales

The more educated the prospect, the faster the sales process, and the higher the close rate.

With this in mind, salespeople ask (or assign ) prospective clients to read or view specific materials so that they can be prepared for a deeper sales conversation once they actually connect.

At IMPACT, we’re able to do this by leveraging our trove of content to educate our prospects and build trust with them. Assignments may include watching videos, reading articles or website pages, or even taking an assessment. 

But how do you actually do assignment selling? What does "assigning" actually look like? And when should you do it? 

Below, we'll share five common scenarios where assignment selling can be used and explain how our sales team typically handles them :

• Qualifying a lead for fit and commitment
• Ensuring prospects are educated
• When a prospect doesn't complete the assignment
• Aligning a new client's team
• Assignment selling when sponsoring or exhibiting at an event

Scenario 1: Qualifying a lead for fit and commitment

If you're anything like IMPACT, there are likely several ways for a visitor to convert into a lead on your website.

This could be filling out a contact form, downloading an offer, or even booking time directly with your sales team.

In the last instance at IMPACT, the next step is a 30-minute conversation to understand two things:

• How do our service offerings match with the prospect's needs?
• How close are they to making a purchasing decision?

However, rather than jumping right into it, we'd use assignment selling prior to our first call to qualify the lead for fit and commitment. 

What does this look like in practice?

Below is an example of an email template we’ll use to prepare prospects for our first call together:

Hi [prospect name], I'm looking forward to connecting with you. To be sure we use our time effectively, here are a few resources that will help you become more familiar with our agency and our approach so you can determine if we're the right fit for your organization. Please take the time to review these before our call. Why We Need to Rethink the Relationship Between Client and Agency What is They Ask, You Answer? Here is a link to my calendar. Please book a time that is convenient for you.

Before you even talk, you need to make sure you and your prospect share the same values.

At IMPACT, for instance, our process is unique, and in our email we make it clear we want our prospects to know as much as possible about this before we meet.

A prospect reading the first article may have some concerns bubble up based on how we work with clients. This might lead them to cancel our meeting, but that's a good thing!

The most precious commodity for businesses and consumers alike is time.

Your sales team's time is better spent speaking with qualified prospects instead of unqualified ones and your buyer's time is best spent with vendors that will actually fit their needs or budget. 

However, should you and a prospect align, you can be sure future conversations will be more meaningful.

Notice that we also hold the prospect accountable to committing to the next stage of the sales process by having them book the meeting. A commitment here ensures follow-through later in the sales process.

Scenario 2: Educating prospects

After your first call, you can use assignment selling again.

Before a second call at IMPACT, we send resources that speak directly to the prospect's situation, which we learned more about in our first call.

This way, if one prospect's needs are mostly related to website redesign, while another prospect's needs center around HubSpot workflows, they will each require different content to move them forward.

Note, you might notice a theme here: You can use assignment selling to take advantage of the space between conversations, keeping prospects active and engaged.

This is not only a continual test of their commitment, but it allows them to self-educate along the way.

By this point, you've already established fit and need, using the information from your initial call.

Using that insight, you can use a template like the one below to send more need-specific focused content. In this case, it's HubSpot training:

Hi [prospect name], It was great speaking with you today! As promised, below are a few specific resources that will be important for you to read prior to our next conversation. How to get your money's worth with HubSpot This is our HubSpot training and implementation page . It dives into the different services we offer. These case studies represent the success other businesses like yours have achieved with IMPACT. Let me know if you have any questions!

Here, assignment selling helps us to address high-level questions we hear in every call before they're even asked. With these out of the way, each subsequent call with a prospect can be more efficient and productive.

Scenario  3: The prospect hasn’t completed the 'assignment'

As you might imagine, there are times when a prospect doesn’t complete the required "assignments" from your sales team. 

When this happens, you have two options:

• You can choose to move forward with the next sales conversation in hopes that the process will go forward as planned.
• You can postpone the next sales conversation until the prospect can confirm they’ve completed the assignment.

The first option probably sounds like the natural path a sales rep would take, while the other sounds incredibly counterintuitive to closing more sales.

Saying to a prospect “it doesn’t sound like you’re ready to move forward,” might sound absurd — and to organizations with an inefficient sales process, it is.

However, in almost every instance, we’ve discovered that choosing to postpone maximizes a sales rep’s time and leads to more won opportunities .

The following is an actual email exchange between a prospect and myself regarding their "assignment" before a call:

Hi [prospect name], Confirming our 2:45pm EST call today. This is a reminder to make sure you take the time to review the resources below before we speak. If not, it may make sense to reschedule. I want to ensure we make the best use of our time together. Marcus Sheridan’s free course: They Ask, You Answer Fundamentals What Is a Learning Center and Why Does My Website Need One? If you haven't had time to peruse the above material, here is my calendar to book another time . Keep me posted!

Prospect's response:

Hi, I haven’t even started yet… Very sorry about that! I will reach out once I read through the articles. [prospect name]

One of the main purposes of assignment selling is to help sales reps spend time with the most qualified, committed, and engaged prospects — the ones most likely to become clients.

If a prospect hasn’t completed the assignment selling homework or taken the time to understand who you are, the conversation stays at a very elementary level. This isn’t the best use of anyone's time.

By pushing back the call and allowing the prospect to do much thinking, you save both parties an hour’s worth of unproductive conversation.

(It’s also worth noting that the prospect mentioned above did voluntarily book a new time to speak with us after completing the assignments.)

One might think that pushing the meeting would frustrate the prospect, but on the contrary, we’ve come to find that prospects appreciate the dedication.

Scenario 4: Onboarding a client team

Over the years, we've found the use cases of assignment selling have extended beyond just the sales process and into the new client onboarding process.

If you’re an agency or you’ve ever worked with one, you’ll know that there’s a lot that needs to be communicated as the relationship gets started. This can include expectations around what’s being done, strategic direction, or outcomes.

For that reason, we use assignment selling as a tool during our onboarding process to align clients, especially teams.

Below is an example email used to support one of our client’s CEOs in creating internal team alignment around our services within their organization. In it, we help set the stage for the rest of our relationship using both written and video content:

Hi [client name(s)], Great meeting with you all today! Please watch the 3-minute video recap of our meeting and, if necessary, share with the rest of your team. Below the video, you'll see some homework with corresponding links and resources that are referenced in the video. [INSERT VIDEO RECAP ] Homework: Course: Self-Selection and the Touchless Buying Experience Article: Virtual Selling: The Essential Video Sales Call Checklist We've got a couple of weeks until we meet again which should be ample time to complete the above homework. Remember that by completing the above, you’ll dramatically improve your internal team’s alignment AND have much more productive conversations with your IMPACT team. Thanks — and as always, let me know if you have any questions. Talk soon!

An email like this gives clients a shared doctrine and understanding that can be distributed beyond your point of influence to the rest of the organization, without risk of losing the impact of the original message.

Scenario 5: Event exhibition or sponsorship follow-up

Like many businesses, IMPACT generates new customers from event sponsorships. 

Here’s a simplified version of our typical workflow on the exhibition floor:

• A prospect comes to our booth.
• They ask us a series of “So what do you do?” questions.
• We ask them a series of “needs assessment” questions.
• If we're aligned, we set up a sales appointment via our calendar links right away.
• The prospect walks away and we move on to the next conversation.

We saw an opportunity to leverage assignment selling to improve the quality and effectiveness of those post-event follow-up conversations.

To do this, we inserted a couple of actions between steps four and five above.

Instead of allowing the prospect to leave the booth and hoping that they'd remember they'd be having a conversation with us in a week or so, we'd ask them to do something in the meantime.

Below is an email template we'd then send a few days later in advance of the follow-up sales conversation as a check-in to confirm that they didn't forget about the meeting or reading.

Hi [prospect name], Everyone at IMPACT enjoyed meeting you at [event name]! I recorded a quick 1 minute video for you below. [insert video ] As you know, we have a meeting scheduled on [meeting date] to continue to talk about They Ask, You Answer and how you can get started with it at [prospect company]. You also received a copy of the book. During our meeting, we'll discuss how They Ask, You Answer relates to your organization, so please come prepared. If you’re not able to get through the reading, please let me know now so we can find a better time to connect. Otherwise, I'd encourage anyone else in your organization (especially in leadership, marketing ,or sales) who shares your mindset of becoming the most trusted voice in your industry to also attend our meeting. Here are a few additional resources to get your team members up to speed quickly: What is They Ask, You Answer? The 'agency model' is broken, here's why. Real results from organizations who've embraced They Ask, You Answer Kind regards,

In this instance, assignment selling helped us turn an event conversation into a real,  effective sales appointment.

Without it, we risk allowing our sales efforts at the event being wasted on no-shows or prospects who aren’t ready for the buying process.

If we go back to what the sales objective really is, it’s about booking the most qualified sales appointments, not the greatest number .

Assignment selling in action

Assignment selling, when done right, is a crucial tool in educating prospects and strengthening the sales process.

If you can educate our prospects about your company, your track record, and our offering, you can move more quickly through the sales process, knowing certain questions were already effectively answered by content.

In turn, your sales process will be shorter, your leads will be more qualified, and your sales reps will be more productive.

What’s more, your prospects will be able to see how committed you are to your central tenets, and this dedication builds trust and demonstrates transparency.

So, don't wait! At every stage of the process, have content specifically designed to assist your sales reps. If they find there’s something they need that doesn’t exist, ask your marketing team to produce it. 

For us, assignment selling is a vital part of what we do, benefiting our team members and our prospects as they move along the path to becoming clients. It can be for your team as well.

To get started, check out our free course, "Assignment Selling: Content Is Your Greatest Sales Tool."

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March 22, 2024

Real Estate Definition: Assignment Sale

When a buyer enters into a purchase agreement for a pre-constructed or newly built property, they may find themselves in a situation where they no longer wish to proceed with the purchase. In such cases, the buyer can assign their rights and obligations under the agreement to a new buyer – and this is where an assignment sale comes in.

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 for completing the deal with the seller. Essentially, an assignment clause allows the buyer to sell the property before they move in. While assignment sales can occur with both homes and condos , they are more common among buyers of pre-construction condos.

Factors to Consider Before Entering an Assignment Sale

While assignment sales can be advantageous, it is crucial for both the original buyer and the new buyer to consider certain factors before entering into such transactions.

Developer’s Consent

Before proceeding with an assignment sale, you must obtain the developer’s consent. Some developers may have strict rules or restrictions, and failure to comply can lead to legal complications.

Assignment Fees

The assignor may charge an assignment fee to the new buyer for transferring their rights and obligations. This fee can vary depending on the market conditions and the specific terms of the Assignor-Assignee Agreement.

Legal Advice

Both parties should seek legal advice before entering into an assignment sale. This ensures that all parties understand their rights, obligations, and potential risks associated with the transaction.

How Does an Assignment Sale Work?

Before proceeding with an assignment sale, the original buyer must obtain the consent of the developer or builder. This step is crucial as some developers may have specific rules or restrictions regarding assignment sales. When the developer consents, the original buyer can look for a new buyer to take over the purchase agreement.

Once there’s a new buyer, both the original buyer and the new buyer (assignee) enter into an agreement known as the Assignor-Assignee Agreement. This agreement outlines the terms and conditions of the assignment sale, including the assignment fee, if any. Then, the developer will review the Assignor-Assignee agreement and may require additional documentation or fees.

Once the developer approves the assignment sale, the closing process begins. At this stage, the new buyer is responsible for completing the purchase, including paying any remaining balance to the developer.

Why Do Assignment Sales Happen?

One primary reason why assignment sales happen is a change of plans. People may decide to leave the area due to personal circumstances such as starting a family, getting married, or looking for job opportunities elsewhere. Additionally, some individuals may face financial challenges that prevent them from completing the purchase.

Alternatively, a common scenario involves investors who never intended to close on the property acquisition. A popular investment strategy is to purchase a property during its early release to take advantage of the emerging market and low pricing and sell it before incurring land transfer taxes, HST, or becoming tied to a mortgage.

Benefits of Assignment Sales

Assignment sales can offer several benefits to both the assignor and the assignee. Some of these benefits include:

Profit Potential

For the original buyer, an assignment sale provides an opportunity to make a profit without completing the purchase. If the market value has increased since the initial purchase agreement, the assignor can sell their rights at a higher price.

Opportunity for Early Ownership

The assignee can benefit from an assignment sale to gain early ownership of a pre-construction property. This can be particularly appealing for individuals looking to invest in real estate or those with specific requirements for a new home.

Flexibility

Assignment sales offer flexibility to both parties involved. The original buyer can exit the purchase agreement without incurring significant penalties, while the new buyer can secure a property without going through the entire pre-construction process.

How a Real Estate Agent Can Help You Navigate this Process

Assignment sales are a complicated process; working with an experienced real estate agent who can help you navigate and understand the ins and outs of this transaction is crucial. These professionals can not only assist you in marketing your assignment, but they can also overcome any limitations imposed by the builder. Moreover, agents have a vast network and can easily connect you with an interested buyer. Although assignment sales may seem daunting, having a skilled lawyer and an experienced realtor is a smart financial move!

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Assignment Sale

An assignment sale in the pre-construction market.

A contract to buy a  pre-construction condo  suite is sold in an assignment sale, or it is “assigned,” to another party. Since the pre-construction condominium has not yet been registered, an assignment sale is typically used to prevent anyone from purchasing the actual unit. The contract itself cannot be sold.

You will receive an assignment clause or right in the form of a contract when you buy a pre-construction condominium unit. Before the condominium is even finished, you can decide to sell your assignment.

• No property is being purchased by Assignee/Buyer from Assignor – A third party is selling the assignee the “right” to purchase their property (usually a builder)
• In the Original Agreement with the Builder, Assignor transfers its rights and interests (or original seller)
• Assignee “assumes” and undertakes to carry out all of the Assignor’s responsibilities under the Initial Agreement as the Assignor’s interest in the original “deposit” is assigned by the Assignor to the Assignee.

The ownership will be given to the buyer once the building has been constructed and registered by the city. Until, it is merely the sale of a contract, but as you shall see, both the buyer and the seller benefit greatly from these deals.

Learn more about  assignment sales  in this article, including their uses, how they work, and how they may be transferred.

This will enable you to decide if an assignment sale is the best option for you. 

What Is An Assignment Sale? Why Do These Kinds Of Sales Happen?

Assignment sale is selling your unit’s rights before it is constructed. There are a variety of reasons why someone might sale an assignment. For instance, someone might have purchased a suite that won’t be finished for three years, but they recently had to move for work. To buy a home in their new city, the buyer might have to sell their contract.

Another typical explanation is that a buyer started the purchasing process while still single but got married or learned they were expecting a child during the  pre-construction   phase. They have recently learned that the one-bedroom pre-construction suite they purchased is insufficient for a growing family.

When this occurs, the “assignment clause” in the purchase agreement is essential. It enables the first purchaser to transfer the contract to another party without incurring financial penalties.

However, whether you are the buyer or the seller, it’s crucial to engage with both an experienced realtor and lawyer who know how to safeguard your interests. These types of transactions are popular and completely legal.

The developer, the assignor, and the assignee are all parties to these arrangements, which are more complicated than a typical resale. Interim occupancy and the final closing are both parts of the two-stage procedure.

An Example Of An Assignment Sale

A simple assignment agreement would only include this. Additional information is provided regarding the mortgage rules and other contract specifics. This is just an overview; each arrangement is distinct and has its own set of guidelines, terms, and conditions.

We suggest that anyone considering buying or selling a pre-construction assignment consult with a real estate agent,  real estate lawyer , and tax accountant. Making contact with a lawyer is crucial since assignors can be responsible for paying a sizable tax on any gains they obtained from the completed transaction.

A pre-construction condominium suite was purchased by John Smith from ABC Developments in 2017 for $400,000 with a total down payment of 20%, or $80,000. In 2022, the project is expected to be finished.

John learned that he would be transferred to a different city in 2021. He's holding onto his condo under construction since he can't afford to buy a new house.

Fortunately for John, the assignment clause permits him to sell his unit's contract before the building is finished and registered!

John has decided to sell his unit's contract to Jane Doe. He was able to sell the contract for $500,000 as a result of market changes. Assignment Purchase: Assignment Agreement: $500,000 Original Purchaser (Assignor) = John Smith New Purchaser (Assignee) = Jane Doe Vendor (Builder) = ABC Developments John Smith's assignment purchase price to Jane Doe is $180,000, which is due immediately. The deposit is $80,000, and the profit is $100,000. This payment's amount and timing are also negotiable.

Jane Doe will occupy the unit for the tenancy period beginning in 2022 when the building is finished and available for interim occupancy. She will now start paying the developer occupancy fees. Until the building can be registered, these fees serve as a substitute for condo and mortgage payments. When a property is declared safe to reside in by the city, interim occupancy occurs. After the municipality conducts a final inspection, the building will be legally registered. Jane Doe can stay in her suite until the building is formally registered.

Assignment Specifics: When the building is legally registered by the city, the developer and the new purchaser transfer official title. Finally, Jane Doe can sign a mortgage document and begin making mortgage and condo payments. Jane Doe's required funds to finalize the transaction to the builder = $320,000 As a current owner, Jane Doe is entitled to all property rights. Any resale of the property in the future will be treated like any other real estate deal.

Is It Worth It to Buy an Assignment?

Because fewer individuals seek out these types of transactions, assignment acquisitions can provide some of the finest discounts in the GTA condo market. In addition to having fewer purchasers, many real estate agents are unfamiliar with the assignment sale’s format and frequently choose not to market these listings. Even lawyers might not be familiar with all the details of an assignment sale.

Due to the high demand in the resale market, buyers may be forced into competitive bidding situations where they may overpay for their suite. When you purchase a contract through assignment, you have the chance to avoid intense competition and frequently pay significantly less than you would for a resale unit.

Both the buyer and the seller may benefit from the assignment condo market. The buyer can save time and possibly thousands of dollars by not having to wait for the building to be finished before listing their property.

Another benefit of purchasing an assignment agreement is that you will receive a brand-new unit that is already covered by the Tarion Warranty Program, which has a seven-year duration. Not to mention that you won’t have to wait the customary 3 to 4 years for the building to be finished and will probably be able to move into the unit sooner!

Here Are a Few Benefits For Buyers to Review:

• Options: When there aren’t enough listings on the market, there are more options.
• Less competition: These kinds of listings are looked at by fewer people.
• Peace of Mind: There is less of a chance for a bidding battle when fewer people are seeing these sales. Bidding wars and spending more money than you can afford only to outbid another buyer can be avoided.
• You Become A VIP: You are likely to inherit builder-provided VIP benefits like the seven-year Tarion Warranty Program and other benefits including credits, upgrades, developing cost caps, and more.
• More Choices: You could still be able to choose your own finishes, colors, and upgrades depending on how far along construction is.
• Negotiate: Sellers typically have to sell in order to release their equity. You may be able to negotiate prices, deposits, and closing dates with this.
• Brand-new Condo: Instead of waiting 2 to 3 years like in a traditional pre-construction contract, you will receive your unit much sooner. The occupancy date is frequently just a few months away.
• Taxes: Saving money on taxes like GST and HST may also be advantageous to you.

Selling an Assignment

In the past, owners who wanted to sell their pre-construction condos had to hold off on listing their condo for sale until the final closing date, which may take months or years. They might have already invested a sizable sum of money in closing costs and occupancy fees by this time.

Although assignment sales are not a new technique in Canada, when compared to other nations where condos have been around for far longer, the process is not always fully understood by sellers, buyers, agents, lawyers, and even lenders. By learning about assignments, sellers have been saving time and increasing their revenues, which has been rewarding.

The popularity of these transactions is rising. Consider it similar to condo flipping. In order to get their deposits back, sellers who transfer their property rights before or during interim occupancy can avoid incurring significant carrying and closing charges.

The majority of builders allow assignment sales, however they frequently have requirements that must be followed. There are still options open to you despite the strict rules in place.

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

• Re-invest: You can withdraw your equity and reinvest in other projects.
• No Carrying Costs: Paying monthly expenses, such as occupancy fees, which can occasionally extend up to two years, is avoidable.
• No Closing Costs: There is no requirement for you to obtain a mortgage or pay any other closing fees.
• Play The Market: Profit from the rising condo market by selling the unit before it is completed and investing the proceeds back into another project. It is a major contributor to Toronto’s economy and is still growing.

Assignments Frequently Asked Questions

It is the sale of a contract to buy a unit that is still under construction. In other words, the contract or right to purchase the property after it is finished is being sold, not a unit that has already been completed. The initial buyer of a property (the “assignor”) transfers their contractual duties to a subsequent buyer (the “assignee”). In general, the assignee will take on all of the assignor’s responsibilities, including paying taxes, interest, and maintenance fees while the property is in transitional occupancy. Upon completion, the assignee receives the real estate’s title and is responsible for paying all closing costs.

It is allowed unless expressly banned in the original buy and selling agreement. In some circumstances, the assignor may be charged a fee by the developer for this form of sale.

It depends. For more information, refer to your purchase agreement. Developers typically won’t allow an assignment sale without their consent, so you’ll need to speak with them and a lawyer. There have been incidents where an unauthorized assignment sale led to the cancellation of the initial agreement and the preservation of the deposit!

If you are looking for an assignment sale network or premium platform to display, locate and access assignment sales and assignable preconstruction projects, place them with confidence, effectiveness, privacy, and security, try Assign Circle. Contact us or check our assignment sale packages for more information. 

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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 may be given an assignment clause in your original Agreement of Purchase and Sale (APS). This is key. This clause gives you the ability to sell the rights to your unit before the condominium is even registered.

• 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, and how you can benefit from this unique transaction as an investor. 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, is it worth it to buy an assignment.

• Is it a Good Idea to Sell An Assignment

Assignments FAQ

The Details of an Assignment Sale

Assignment sales is not a new strategy in Canada, particularly assignment sales in Toronto. However, compared with other countries where condos have been around much longer, the process of assigning a condo in Ontario 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 maximizing their profits.

Why do pre-construction assignment 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.

Pre-Construction Purchase

In 2017, John Smith bought a pre-construction condominium unit from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. He signed the original Agreement of Purchase and Sale (APS), and the project is set to be completed in 2024.

Original Buyer Needs to Relocate

In 2023, John discovers he will be relocated to a new city for his job. He can't afford to buy a new home while holding onto his pre-construction condo unit.

Original Buyer Becomes an Assignor

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

Assignee Buys the Rights to the Unit

John contacts an experienced pre-construction sales agent who networks on his behalf to find an interested buyer (an assignee). His agent finds Jane Doe, who wants a great deal on a new condo and decides to buy the rights to John's unit. As the assignee, Jane decides to make the purchase and agrees to perform all of the assignor's obligations outlined in the original APS. 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.

Assignee Moves In

In 2024 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.

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.

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.

Is It a Good Idea to Sell An Assignment?

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. If you find you want to sell your unit before its closing date, assigning it can be a great choice. This can help you save money and avoid paying 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.
• Gain a Profit: In a seller's market, you may be able to sell the rights to your unit at a higher price than you bought it, gaining a profit. This is like 'condo flipping'. In the right real estate environment, assigning your unit can be a lucrative financial move.
• No Carrying Costs: By passing the right to your unit to someone else, you can avoid paying monthly occupancy fees to the developer that can sometimes last up to two years.
• No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.

Register With GTA-Homes to Learn More

Our team of Platinum Agents is very well-versed in assignment sales and can help you make the most of your investment. Whether you are interested in buying or selling an assignment, we can help you follow the right track for the best possible outcome. There are excellent opportunities to be had now in the GTA. With a Platinum Agent, you can find 'hidden deals' that may not be advertised elsewhere. You can also gain access to eager buyers as a seller and get ahead. Register below and let us connect you with the best advice.

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 are interested in either buying or selling a pre-construction condo assignment, working with a realtor who is experienced in finding, negotiating and drawing up an offer for these types of sales can be invaluable. You’ve come to the right place! At GTA-Homes, we have a wealth of expertise, knowledge and resources when it comes to assignment sales. We would be more than happy to assist you in finding an excellent opportunity in the GTA for a prosperous future. Register now to connect with our award-winning team.

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What You Need to Know About Condo Assignment Selling and Buying

By Condo Culture

9 Primary Steps Involved in Selling a Condo Assignment

• Review the Terms of Your Agreement of Purchase and Sale
• Get Approval From the Builder to Ensure Your Unit Can Be Assigned
• List Your Assignment For Sale (Advertising on MLS is typically prohibited by the Developer)
• Have Your REALTOR® Field Buyer Offers and Negotiate the Best Deal Possible
• A First Deposit Is Collected and Held In Trust By Your Real Estate Brokerage or Lawyer
• Work Through the Conditions Of An Offer With Your Selling Team
• Builder Approval Needed From the Purchaser On Proof Of Financing
• A Second Deposit Is Collected - Typically the original 15% to 20% Deposit
• Remaining Money Is Received Once the Unit Closes - the Difference Between Your Original Purchase Price and the Assignment Sale Price

There are all sorts of intricacies with condo assignment sales and purchases, so it’s important to first connect to a brokerage and REALTOR® with lots of assignment transaction experience under their belt.

We have helped hundreds of clients with their assignment buying and selling needs, and our client’s excitement and enthusiasm when a transaction is completed is incredibly rewarding! We are the area’s premier condo selling and buying team and walk hand-in-hand throughout the entire assignment process with our clients. We have a few exciting condo assignment listings available right now at Station Park and Garment Street Condo, each one includes a detailed floor plan so you can understand what the final product will look like. If one or more of those assignments interest you, be sure to click on the “TALK TO A CONDO CULTURE EXPERT” button and provide your information so one of our specialists can reach out to you.

Before getting into the nitty-gritty details of condo assignments, let’s first touch on the basics of them, so you have a sound understanding of the terms and how they work.

Outlining What a Condo Assignment Sale Is

In its purest form, a condo assignment is a unit that was originally purchased by a buyer during the pre-construction phase and that buyer wants to sell it prior to the building’s construction being completed, before an occupancy date reached and the building has been officially registered. The original buyer may want to sell the condo due to changing financial circumstances, he or she originally intended to move into the unit but plans have changed, it’s an investor who has too many units and wants to sell one off, or for a variety of other reasons.

Each condo developer handles assignment options differently, and some don’t allow them at all, so it’s important that if you’re buying a pre-construction unit, you understand the circumstances around them in case you need or want to sell prior to the completion date.

When a pre-construction is first purchased by a buyer, an Agreement of Purchase and Sale (APS) is drafted which outlines the purchaser’s legal rights and obligations. The person who is selling a condo assignment is named the assignor and the buyer is designated to be the assignee. An assignment clause is typically included in the APS and the fee is usually in the $5K to $15K range, but every developer has its own fee and terms.

How An Assignment Deal Gets Finalized

A conditional offer and agreement between the assignor and assignee becomes legally binding once the first deposit is made by the assignee, and that amount is negotiable. The assignee has 10 days after making the first deposit to have his or her lawyer review all original documentation to ensure everything looks solid. One common clause to be aware of is unit upgrades and unpaid unit upgrades, so there are no financial surprises as the condo moves through its construction process. The assignee is typically responsible for any outstanding costs including unpaid upgrade expenses, but like most aspects of assignment deals, everything is negotiable. Once the lawyer review is completed and deal conditions have been met, the next deposit by the assignee is required - typically 15% to 20% of the sale price or whatever the assignor originally paid as a deposit. Once the developer approves the transaction or when the assignee receives a mortgage once the building has been registered and occupancy begins, then the difference in price between the pre-construction price and assignment sale price will be paid to the assignor. The assignee is also responsible for the typical real estate closing costs at this point including Tarion warranty enrolment fees .

Benefits for Assignors

Most notably, the seller of an assignment is often making some sort of a profit - how much that ends up being varies depending on current market conditions, how far along the development is, what the assignment fee was, HST and tax implications, and other factors.

The next benefit is that there are no closing costs because the sale is happening before the building has wrapped up construction, so no mortgage is involved and closing costs are non-existent.

Once the assignment is sold and the APS belongs to the new owner, the assignor receives money as outlined above and can use it as he or she pleases for real estate or otherwise. Want to sell your condo assignment? Be sure to connect with us to leverage our deep experience with selling assignments as we have thousands of active buyers engaged on the region's top condo specific search site: CondoCulture.ca, do email marketing to thousands of subscribers through our One List and weekly newsletter , promote listings on our social media accounts, feature listings in our Uptown Waterloo store windows, plus so much more to ensure the success of our condo assignment sellers.

Benefits for Assignees

A big benefit to buying a condo assignment is that you can get access to a development that’s likely already sold out. Station Park is one example - the first two towers sold out extremely quickly in 2019, but we have sold dozens of assignments in Tower 1 and Tower 2 to buyers who couldn’t get their hands on a unit initially, but got their opportunity through an assignment.

With the condo resale market white-hot and multiple offers on almost every listing, assignments provide a fantastic buying opportunity as there’s often less competition for this type of real estate purchase. Assignments typically can’t be listed on traditional marketing channels such as MLS so you tend to see that fewer potential buyers are aware of them. This means that Assignment Units can often be purchased for their list price or at least in that general range. At any given time, Condo Culture has a number of off-market, exclusive listings that cannot be found on MLS, Realtor.ca, or coming soon listings. Bottom line - working with our team of REALTORS® gives you an unfair advantage for tapping into these exclusive listings as they first become available.

There can also be some outstanding value buying opportunities if assignors need some capital relatively quickly and are extra motivated to sell fast. There might be some room to negotiate on the list price and a unit can even potentially be purchased below the current estimated market value. This sort of scenario is especially attractive if the occupancy date is just a few months away and the asset can be used to live in or lease out in the not too distant future. Be sure to leverage our condo assignment buying experience - we have literally sold dozens of them over the past few months, and hundreds throughout our company’s history.

Assignments and HST

The assignor will need to pay HST on the profit that he or she makes on a condo in addition to the deposit money that gets returned - on average, roughly 78% of those amounts are taxable, but each and every assignment deal is unique and should be supported by experienced professionals including lawyers and accountants.

Real estate is often a numbers game, and what we are increasingly seeing is the list price being adjusted to essentially bake in the HST expense that will need to be paid. So if an assignor wants to clear $x from the sale, our experts are calculating the estimated HST that will need to be paid and adding it in. Every assignment sale and situation is unique, and that’s where our team’s specialized expertise comes in handy, so an assignor won’t be surprised when it comes time to pay the government their fair share. However, we strongly recommend working with professional accountants who have significant assignment deal experience - we can provide you with a shortlist of our favourites should you decide to list yours for sale through Condo Culture. We can almost always provide a breakdown of financial insights to our clients, but again, we strongly encourage working with a professional accountant who is well versed in assignment transactions to receive the most accurate numbers.

End-users who are looking to buy assignments can potentially get a break when it comes to paying the HST, but as we outline below, every deal is different, assignment laws are evolving, and it’s so important to have an experienced accountant and lawyer on your team to know what potential options are at your disposal.

Top Legal Considerations and Clauses For Assignment Deals

Every assignment deal is different and unique in its own right, so it’s vitally important to hire a lawyer who has extensive experience with these types of transactions. Laws regarding assignments may change over time, so again, a lawyer who has this specific expertise will be key to your assignment selling and buying success. Our team has worked with several lawyers to help bring assignment deals to the finish line, and we are more than happy to make recommendations when the time comes for legal representation.

A big part of each assignment deal is that the deal isn’t officially completed until the project’s developer has given formal approval in writing, and during this time, the seller has the ability to cancel the sale if he or she decides to (this is a very rare occurrence). One of the most common reasons for this happening is the condo’s value is increasing rapidly and the seller may feel that he or she can get a better deal elsewhere to realize a larger profit. No profit is made on an assignment sale until the building is registered, and the deal officially closes. The assignor will get the first deposit and his or her 15% to 20% deposit back, but won’t get the additional money until the building’s registration event takes place. Legal terms such as these mentioned here are typical assignment deal standards, but each agreement certainly has its own, and your lawyer will need to go through every clause and sentence with a fine-tooth comb.

In most cases, MLS / Realtor.ca can’t be legally utilized for assignment listings (unlike resale properties), so the buyer has to come from elsewhere. Again, that’s why Condo Culture is incredibly valuable when it comes to assignments since we have a large buyer database to pull from and the region's most active condo search site, along with many different marketing channels to ensure our sellers can connect with quality buyers to maximize the final sale price.

You need a complete team between a real estate professional, lawyer, and accountant to support you whether you’re selling or buying an assignment. This type of real estate product is much different from a resale property as you’re essentially buying and owning an agreement until the condo is registered and reaches its occupancy date.

We have created resources on this important topic in the past, we outlined the benefits of condo assignments and provided information on what they are and how to manage the assets, and also how to assign a pre-construction condo .

We are the area’s condo assignment expert, so if you’re looking to sell or buy one of these units, be sure to reach out to us so we can explore potential options with your exciting goals at the forefront of it all. Also, feel free to stop by our Waterloo office (pictured above) right below Bauer Lofts at 191 King Street South in Waterloo for a conversation, our team would love to speak to you about any of your condo goals.

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What You Need to Know About Assignment Sales

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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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Home » Real Estate News » Real Estate Guide » Assignment Sales

Fundamental Difference Between a Resale vs Assignment Sales

June 21st, 2023 8 min read -->

A resale is a transaction where the buyer purchases a property from the original owner. The property is already completed and ready to move into. On the other hand, an assignment sale is a transaction where the buyer purchases the rights to a property from the original owner. The property is under construction and is still being prepared to move into. Here is a table that summarises the key differences between Resale vs Assignment Sales

Table of Contents

What are the Pros and Cons of an Assignment Sale?

Assignment sales, also known as contract assignments or flipping contracts, are common in the real estate market. In an assignment sale, a buyer who has entered into a purchase agreement with a seller transfers their rights and obligations under the contract to a third party before the completion of the sale. While assignment sales can offer certain advantages, they also have potential drawbacks. Let’s explore the pros and cons of Assignment Sales: 

Pros of Assignment Sales 

• One of the primary advantages of assignment sales is the potential for a significant profit. Assignors can secure a property at a lower price and then sell their contract to a new buyer at a higher price, capitalising on market appreciation or favourable negotiation.
• Assignment sales allow buyers to secure a property without obtaining a mortgage or making a down payment upfront. This flexibility can benefit investors or buyers who may need more immediate access to funds but want to secure a property at a particular price.
• Assignors can avoid the financial risks of property ownership, such as mortgage payments, property taxes, and maintenance costs. If the market conditions change or the buyer’s circumstances alter, they can sell the contract to another party without taking on these financial burdens.
• Assignment sales provide a quick exit strategy for buyers who may change their minds or encounter unforeseen circumstances that prevent them from completing the purchase. By assigning the contract to another buyer, they can exit the transaction without the complications of selling the property on the open market.

Cons of Assignment Sales

• Assignment sales involve intricate legal processes and require the involvement of multiple parties, including the original buyer, the assignee, the seller, and sometimes even lenders. The complexity can lead to challenges, delays, and increased legal expenses.
• The success of an assignment sale depends on the consent of the original seller. Some sellers may not permit or may have restrictions on assignment sales, limiting the pool of potential properties available for assignment.
• As an assignor, you relinquish control over the property and the final sale process once you transfer the contract to the assignee. This lack of control can be frustrating if the assignee’s actions or decisions affect the property negatively or lead to complications.
• In a declining market, an assignor may need help finding a buyer willing to pay the assigned price. This can result in financial loss if the assignor cannot sell the contract or need to sell it at a lower price than they initially anticipated.
• Some critics argue that assignment sales contribute to housing speculation and affordability issues, as they can drive up prices and limit housing supply. This perception can lead to negative public sentiment and potential regulatory scrutiny in some markets.

Assignment Sales for Sellers: What are its Advantages? 

• Higher Selling Price : In an assignment sale, sellers can sell their property more elevated than the original purchase price. Assignors, who act as intermediaries, often negotiate a higher price with the new buyer due to market appreciation, renovations, or other factors. This allows sellers to maximise their profit and earn more than anticipated.
• Faster Sale Process : Assignment sales can expedite the sale process for sellers. Rather than waiting to complete the original contract, sellers can transfer their rights and obligations to the assignee. This enables them to sell the property without going through the typical marketing and negotiation process, which can save time and effort.
• Avoidance of Holding Costs : Sellers can avoid holding costs associated with property ownership by selling through an assignment. These costs may include mortgage payments, property taxes, insurance, maintenance, and other ongoing expenses. Selling through an assignment allows sellers to transfer these responsibilities to the assignee, potentially saving them money in the long run.
• Increased Flexibility : Assignment sales provide sellers more flexibility regarding their plans. By completing the sale through an assignment, sellers can move forward with their plans without waiting for the original contract to close. This can be particularly advantageous if sellers need to relocate, downsize, or make other arrangements quickly.
• Lower Marketing Costs : When selling a property traditionally, sellers often need to invest in marketing efforts to attract potential buyers. This can include listing fees, advertising expenses, staging costs, and other related expenditures. In an assignment sale, the assignee typically assumes the responsibility of finding a new buyer, reducing or eliminating the need for sellers to incur marketing expenses.
• Minimised Default Risk : In certain situations, sellers may encounter circumstances that prevent them from completing the original purchase contract. This could be due to financial constraints, changes in personal circumstances, or other unforeseen events. By assigning the contract to a new buyer, sellers can avoid defaulting on the contract and potential legal consequences.

What are the Advantages of Assignment Sales for Buyers? 

Assignment sales offer several advantages for buyers in the real estate market. Here are the key benefits of assignment sales for buyers:

• Potential for Lower Purchase Price : Buyers engaging in assignment sales can secure a property at a lower purchase price than buying on the open market. Assignors often negotiate a favourable purchase price when they contract with the original seller. This can be advantageous for buyers looking for a good deal or who want to invest in properties with potential appreciation.
• Flexibility in Financing : Buyers participating in assignment sales can enjoy greater flexibility in financing options. Since they are buying the contract from the assignor, they may not need to secure a mortgage or make a substantial down payment immediately. This flexibility can be particularly beneficial for buyers needing more immediate access to large sums of money or facing challenges in obtaining traditional financing.
• Ability to Customize the Property : In some cases, buyers engaging in assignment sales can customise or make changes to the property before the completion of the sale. This flexibility allows buyers to tailor the property to their preferences by selecting finishes, fixtures, or design elements and creating a personalised living space or investment property.
• Potential for Profit : Assignment sales can provide buyers with profit potential. Suppose market conditions favourably change between the time the assignor entered into the contract and the completion of the sale. In that case, buyers can sell the property at a higher price, capturing the appreciation and generating a profit without ever taking ownership. This profit potential can attract investors or buyers looking for short-term gains.
• Expedited Purchase Process : Assignment sales can facilitate a faster buyer purchase process. Rather than going through the lengthy process of searching for a property, negotiating with sellers, and dealing with potential competing offers, buyers can step into an existing contract and finalise the sale with the assignor. This can save time and streamline the purchase process, allowing buyers to secure a property quickly.
• Lower Transaction Costs : Assignment sales may involve lower buyer transaction costs than traditional property purchases. Since buyers purchase the contract from the assignor, they may not need to pay certain closing costs associated with the initial purchase, such as land transfer taxes or legal fees. This can result in savings and make the overall transaction more affordable for buyers.

What Disadvantages Does a Buyer Face on Assignment Sales? 

Here are the key drawbacks of assignment sales for buyers:

• Limited Property Selection : Assignment sales often involve a limited pool of properties. Assignors may sell their contracts for various reasons, such as properties with a potential appreciation or in-demand locations. As a result, buyers participating in assignment sales may have fewer options than in the broader real estate market.
• Potential Seller Consent Issues : The success of an assignment sale depends on the consent of the original seller. Some sellers may have restrictions on assignment sales or may simply refuse to allow the transfer of the contract to a new buyer. This can create challenges for buyers who have invested time and effort into an assignment transaction only to have it rejected by the original seller.
• Lack of Control and Information : Buyers engaged in assignment sales have limited control over the original contract and the terms negotiated by the assignor. They may have yet to be involved in the initial negotiation process, which can lead to uncertainty about the terms and conditions of the purchase. Additionally, buyers may need more access to information about the property, its history, or potential issues, as they rely on the assignor for this information.
• Increased Complexity and Potential Delays : Assignment sales can be more complex than traditional property purchases. Multiple parties include the original seller, the assignor, and potential lenders. This complexity can lead to delays, as other legal and administrative processes may be required. Buyers may need to navigate various agreements and documents, potentially leading to more extended closing periods or increased legal expenses.
• Higher Risk of Non-Completion : Assignment sales carry a higher risk of non-completion than standard property purchases. Since buyers are assuming a contract from the assignor, they may face uncertainties and risks associated with the assignor’s ability to fulfil their obligations. If the assignor fails to complete the contract, it can lead to complications, potential legal disputes, and the loss of any invested time or resources.
• Market Fluctuations and Financial Loss : While assignment sales can offer profit potential, they also expose buyers to the risk of financial loss. Suppose market conditions decline or change unfavourably between the time of the assignment and the completion of the sale. In that case, buyers may need help to sell the property for a profit. Sometimes, they may need to sell lower than the initial purchase price, resulting in a financial loss.

What are the Disadvantages of Assignment Sales for a Buyer?

Here are the key drawbacks of assignment sales for buyers: 

• Limited Property Selection: Assignment sales often involve a limited pool of properties. Assignors may sell their contracts for various reasons, such as properties with a potential appreciation or in-demand locations. As a result, buyers participating in assignment sales may have fewer options than in the broader real estate market.
• Potential Seller Consent Issues: The success of an assignment sale depends on the consent of the original seller. Some sellers may have restrictions on assignment sales or may simply refuse to allow the transfer of the contract to a new buyer. This can create challenges for buyers who have invested time and effort into an assignment transaction only to have it rejected by the original seller.
• Lack of Control and Information: Buyers engaged in assignment sales have limited control over the original contract and the terms negotiated by the assignor. They may have yet to be involved in the initial negotiation process, which can lead to uncertainty about the terms and conditions of the purchase.
• Additionally, buyers may need more access to information about the property, its history, or potential issues, as they rely on the assignor for this information.
• Increased Complexity and Potential Delays: Assignment sales can be more complex than traditional property purchases. Multiple parties include the original seller, the assignor, and potential lenders. This complexity can lead to delays, as other legal and administrative processes may be required. Buyers may need to navigate various agreements and documents, potentially leading to more extended closing periods or increased legal expenses.
• Higher Risk of Non-Completion: Assignment sales carry a higher risk of non-completion than standard property purchases. Since buyers are assuming a contract from the assignor, they may face uncertainties and risks associated with the assignor’s ability to fulfil their obligations. If the assignor fails to complete the contract, it can lead to complications, potential legal disputes, and the loss of any invested time or resources.
• Market Fluctuations and Financial Loss: While assignment sales can offer profit potential, they also expose buyers to the risk of financial loss. Suppose market conditions decline or change unfavourably between the time of the assignment and the completion of the sale. In that case, buyers may need help to sell the property for a profit. Sometimes, they may need to sell lower than the initial purchase price, resulting in a financial loss.

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Frequently Asked Question (FAQs)

What is the purpose of resale.

Resale is to transfer ownership of a previously owned item or property from the seller to a new buyer.

What is selling and reselling?

Selling refers to exchanging goods or services for monetary compensation, while reselling involves selling something previously purchased, typically to make a profit.

How much money can you make from resale?

The amount of money on resale depends on the type of property you have and the real estate environment of the area.

What is a good resale percentage?

The resale percentage depends on the real estate environment.

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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.

The Davies Has Exceptional New Toronto Condos for Sale

If you are looking for a new Toronto condo for sale, get in touch with our sales team by calling 647-360-9588 or register online to view our floor plans .

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