An assignment sale of a new Condo can be defined as a purchase of the original Agreement of Purchase and Sale (APS) from the original “pre-construction” condo purchaser (Assignor), to the new owner (Assignee). An assignment sale mostly takes place between the time construction starts until final closing/registration.
The following primary advantages are some of the reasons why the original purchaser (Assignor) may want to sell on assignment:
- They do not have to pay the closing costs, land transfer taxes or return the GST/HST rebate to the builder.
- They will also not be responsible for payment of the mortgage, maintenance fees or property taxes from the time they list the property until they sell it, if properly defined in the sale contract.
The buyer (Assignee) of a new condo has a few advantages as well if they purchase a property under an assignment sale.
- They may be able to make some of the final design decisions, if they purchase the condo before the builder’s deadlines for selection.
- All the original incentives offered by the builder to the seller (Assignor) transfer to the buyer (Assignee) upon acceptance of the assignment agreement.
- But more importantly, they may still be purchasing the condo at a lower price than what it may be worth upon final closing.
One of the main builder stipulations of an assignment sale is that if the condo is still under construction, the builder needs to accept and approve the assignment. The builder fully expects that the new purchaser (Assignee) will fulfill all the original contract details and conditions and complete the closing of the sale, as if they were the original purchaser.
Even if the contract does have a clause that states assignment sales are allowed, the original purchaser (Assignor) still needs to receive consent from the builder. Depending on the builder, there usually are multiple requirements, forms and fees imposed for an assignment sale to be fully legal. It is always a good idea to get an experience realtor and lawyer involved that is specifically familiar with assignment sales and agreements.
Note, when the original buyer (Assignor) has permission to list the property as an assignment sale, they need to follow their builder’s rules relating to such listings. In many cases, the builder will not allow the property to be listed on the MLS system. If an MLS listing is not permitted, then the original buyer (or his/her Realtor) will need to find other ways to market and attract potential buyers.
The seller (Assignor) will expect to receive a return of their deposits to the builder as well as the profit from the sale. Depending on the negotiated assignment agreement and how the assignment agreement is structured, the original buyer (Assignor) will either receive the full payment once the assignment agreement closes (once builder approval is received) or receive the deposit at the time the assignment is approved and the balance on pre-negotiated dates. There could be variations on the payment structure. It all depends on what has been negotiated in the assignment agreement.
There are many factors to consider in an assignment sale such as original purchase price, the new purchase price, deposits that were made and adjustment payments to the builder. Also, there are many clauses in the original agreement of purchase and sale specific to these sales as well as HST considerations. Anyone who is considering an assignment sale purchase needs to work with a realtor who has experience with these types of sales. Only an experienced agent will be able to provide the necessary assistance so that the sale is a success.
If you are considering selling or purchasing a condo on assignment, call me to discuss!