If you’ve got into a real estate dealing recently, then you’ve surely heard the term ‘assignment sale.’
Buying and selling pre-constructed condos on assignment sales have become a popular part of the Toronto real estate market. Speculative condo investors are very active in this type of agreement. Many people find it attractive, but it’s very different from a traditional deal.
Before signing a condo assignment agreement, here are a few things you need to know.
What Is an Assignment Sale?
An assignment sale refers to buying a property from the original buyer before the final closing date. When a buyer purchases a pre-construction condo, he/she receives ownership of the Agreement to Purchase and Sale contract. If he/she sells the ownership of the Agreement to Purchase and Sale contract to another buyer before the possession of the property, it is known as an assignment sale.
How Is It Different from a Traditional Resale Agreement?
A condo resale means that you’re buying a property or real estate that’s physically present, whereas in an assignment sale, you get the right to own the property. In the case of an assignment, the property or condo doesn’t physically exist yet. You get the ownership on paper, but you won’t possess it until a later date. Remember, your title will not go on the condo until the final closing date.
The difference is not only in terms of ownership, but also in terms of money to be paid. In an assignment sale, the new purchaser must pay a larger amount for a down payment as compared to the resale. The original buyer must have paid 20% of the actual condo price as down payment. But the new buyer needs to pay the 20% down payment plus the difference between the new purchase price (asked by the original buyer) and the actual purchase price from the builder.
What Do Buyers Need to Know?
If you’re interested in buying a condo on assignment, then be ready because very few sellers advertise for an assignment sale. If you find such a seller, be sure that you get the condo at the right price. Consult with the builder and a reliable lawyer before getting into the agreement.
What Do Sellers Need to Know?
If you want to sell your pre-constructed condo on assignment, then a written permission from the builder is necessary. Without this permission, the builder can create problems and prohibit you from selling until they have sold a certain number of units. The restriction of real estate boards on MLS (Multiple Listing Services) advertising makes it difficult to find buyers for your property.
Purchasing and selling a condo on assignment agreement can be a risky affair if you aren’t prepared. Unlike resale transactions, this agreement can cost a lot of money and possession of the unit won’t be transferred until later. It can still be an advantage you however, just make sure you’ve taken all the factors into consideration and hired a qualified lawyer before signing.
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