Frequently Asked Questions

Assignment Deal is the transfer of a pre-construction unit’s purchase contract to a buyer is known as an assignment deal. This applies to various types of properties, including condominiums, detached, and semi-detached homes. An assignment deal occurs when the pre-construction unit has not yet been registered, meaning the ownership of the unit does not exist, and only the contract is being sold. The Builder’s Agreement of Purchase and Sale (APS) for a pre-construction unit typically includes an assignment clause or right, which enables you to sell the unit before it is constructed or fully completed. Important Points :

In an assignment deal, the Assignee (buyer) purchases the contract that grants them the right to obtain the unit from a third party (e.g., the builder). They are not directly buying the property from the Assignor (seller).
During an assignment deal, the Assignor transfers their interests or rights in the original contract with the builder to the Assignee. The Assignee then assumes and agrees to fulfill all of the Assignor’s obligations under the original agreement, as if they had bought the unit directly from the builder.
The ownership of the building/house will only be transferred to the Assignee (buyer) after completion and registration with the city. Until that point, the transaction is simply a contract sale.

Another very important key point to be aware of ● It’s advisable to team up with a real estate group that is well-versed in both assignment contracts and purchases. Such a team typically comprises a realtor, solicitor, and mortgage broker. With a multi-member support team, your due diligence will be more robust, providing additional safeguards against any unforeseen complications that may emerge after you have removed conditions from the deal.

Is Buying Assignment good for you?

Purchasing on assignment can offer numerous advantages. You can acquire a unit in a brand-new building, tailor it to your liking, and gain equity when it is registered. Additionally, your funds will not be locked up for an extended period in a pre-construction condo purchase, and you can enjoy a quick closing without any wait time.
During a seller’s market, buyers may frequently encounter bidding wars, resulting in them paying a considerably higher price. Rather than pursuing this option, purchasing an assignment can be a great alternative since, relatively speaking, there is less competition for these properties, potentially lowering the cost for the buyer.

Benefits for Assignors to SELL the Assignment?

Pre-construction sales typically involve a lengthy period before the unit is ready for occupancy. By opting for an assignment sale, the Assignor can exit their contract without having to go through the mortgage process or incur closing costs associated with reselling the property. From an investor’s standpoint, an assignment sale offers the advantage of not only receiving the initial deposit back but also negotiating for a higher price with the Assignee. With the current rise in demand for condos, many investors can secure their profits from an assignment sale and use them for their next investment opportunity.

Benefits for Assignee to Purchase the Assignment?

Purchasing an assignment can be less expensive than buying a comparable resale property on the current market. This is because the assignor, the seller or original purchaser, would typically need to provide an incentive to sell due to the uncertainty of buying something that has yet to be constructed. Additionally, there may have been a significant increase in property values since the original purchase, which may allow room for negotiation.

Assignments vs. Resale: Which is Better?

We frequently receive inquiries from individuals who are contemplating whether to assign the condo they have purchased or wait for the building to register and sell it as a conventional resale condo.

Pros of Selling an Assignment

Recover your deposit and secure your profits earlier.
No headaches of getting financing
You don’t have to worry about market fluctuations, as who knows what will happen to real estate prices by the time the building registers.
Let the next buyer worry about the extra closing costs.

Cons of Selling an Assignment

It is important to be aware of any potential tax implications that may arise. When assigning an Agreement of Purchase and Sale, it is essentially equivalent to selling the contract between the original purchaser and the developer. This may be considered as business income by the Canada Revenue Agency, which is fully taxable and not eligible for capital gains exemptions provided by the sale of real property. The CRA is vigilant about individuals who fail to report such income, especially among condo flippers, and is taking steps to crack down on non-compliance.
Assignment deals tend to sell for less than resale.
Assignment deals can be intricate, hence it is crucial to work with an agent who has proficiency in assignment deals and a competent lawyer.

Pros of Buying an Assignment

Assignments are cheaper than the current market value of a similar resale property, as the assignor (the seller or the original purchaser) would need to give an incentive to purchase all the uncertainty that comes with buying something that probably isn’t built yet.
In cases where the assignor (the seller or the original purchaser) is in a distressed situation, an assignment deal can potentially offer a good deal. It may be possible to negotiate a mutually beneficial arrangement where you acquire the property at a favorable price while the assignor is relieved of a difficult situation.
If you require a longer closing period, an assignment deal could be advantageous as assignments are typically sold well in advance of the final closing date.

Cons of Buying an Assignment

It can be cash intensive, as any smart assignor (the seller or the original purchaser) will want their original deposit and their profit upfront.
You may need to take on additional closing costs, such as development levies and utility hookups, when purchasing an assignment. Additionally, if your real estate agent did not advise you to hold back funds for property taxes from the day the original purchaser took occupancy until the final closing, you may be responsible for paying that retroactive tax bill yourself.

Should I sell my condo on assignment?

Many pre-construction buyers choose to sell their properties on assignment as part of their investment strategy. However, the decision to do so depends on your individual situation. It’s possible that your lifestyle has changed, and the unit that once excited you is no longer suitable. Alternatively, you may be facing financial challenges and require immediate cash.
No matter what circumstances you find yourself in, Our Team is here to assist you in determining whether selling on assignment is the best choice for you.

Will I get my deposit back?

A new purchaser (Assignee) who is buying on assignment should pay the Assignor their full deposit plus profit.

Considering Buying or Selling an Assignment or Pre-Construction project ?

Are you considering assigning your condo or house? Contact us and we can put you in touch with a specialist who has experience in assignment sales and can guide you through the process.