What is an Assignment?
An assignment condo sale refers to buying a condo off a previous buyer before it is officially registered in the Land Registry System. To illustrate the most common type of example in today’s market, please see the following scenario:
A buyer purchases a pre-construction condo through the condo sales office. His or her intention is to live in that condo once it’s completed in a few years. However, plans change after about a year or so, and that buyer decides they want to sell their pre-construction condo prior to taking occupancy or ownership of the unit. This can be accomplished using an assignment sale, where the original buyer finds a new buyer for their condo. This new buyer assumes the responsibilities and enjoys all the benefits which were offered to the original buyer.
Assignments Condos VS. Resale Condos
When you buy a resale condo, you are essentially buying “real estate”; meaning it’s a property which physically exists and which you can touch and see. This property is also officially registered in the Land Registry System. On the other hand, when you buy an assignment, you are not buying “real estate” but rather the “right to own real estate”. Meaning: you are buying a piece of paper which says you will own a condo at a future date.
The biggest differences between assignments and resale condos, is that with assignments you are not required to obtain a mortgage and the closing date is years, not days, away. On the other hand, if you purchase a resale condo, you can typically get away with paying as little as 5-10% down and have a closing date that is 30 days away or even less.
Can I sell my Mississauga Condo via Assignment?
It depends on whether or not your original purchase and sale agreement has an assignment clause attached to it. An assignment clause is essentially the builder’s legal way of allowing you to sell your pre-construction condo before its ready. Not all condo builders allow for assignments to be sold and those that do allow for assignments to be sold typically charge between $3000-5000 should the option be exercised.
When buying your pre-construction condo, carefully review your condo agreement with your Realtor and ensure that this clause is included. Even if you think you are not going to sell your condo prior to occupancy, it is always a good idea to have the assignment clause as a “back-up” option.
How to sell an Assignment Condo?
Most builders do not allow you to put your condo assignment for sale on the MLS website. Since the MLS website is the most popular way of selling your condo, this really imposes a challenge for those looking to sell their unit. The option to advertise to sell your condo is thus limited to other websites such as kijiji and craigslist. The easiest way to sell your unit would be to find a friend who would be interested in taking over your investment.
What Buyers need to know about Assignments?
Since assignments are not advertised well, finding them can get tricky. If you find someone selling an assignment, you can potentially score yourself a great deal provided that the assignment is priced right. You should know that in most instances to complete the assignment sale, as a buyer, you will be required to pay the 15-20% of the purchase price, plus any profit the buyer asks for. Always consult with the builder and a qualified lawyer before proceeding with the assignment sale.
What Sellers need to know about Assignments?
As addressed above, in order for a seller to sell their condo by way of assignment, he or she will need written permission from the builder. Advertising on MLS is in most cases prohibited, thus finding a buyer can seem challenging at times. Understanding why most buyers get discouraged from considering an assignment should also be noted. These reasons include:
Price – If a buyer can get the same condo for the same price directly from the builder, then why should they buy it from you?
Closing too far away – You simply cannot expect to buy a pre-construction condo and sell it six weeks later. Condos take some time to appreciate in value
Closing costs – For pre-construction condos closing costs are an unknown variable. This gets some buyers worried. Historically speaking, these costs are around the $8000 mark for a one bedroom in Mississauga.
Condo Assignments are not for everyone. At times condo assignments can be a great way for a desperate seller to unload his pre-construction condo and for a buyer to strike a great deal. However, they do require extra patience and expertise which many buyers, Realtors and lawyers have a hard time committing to.
At the present time, I myself as a Realtor; do not handle assignment condo sales. This might change in the near future.
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