What is an Assignment Sale?
Introduction:
Are you considering investing in a pre-construction condominium but unsure about the potential risks and uncertainties? Look no further than pre-construction assignment sales. In this comprehensive guide, we’ll delve into the world of assignment sales in the pre-construction market, explaining what they are, how they work, and why they can be a lucrative opportunity for buyers and sellers alike. By the end, you’ll have a clear understanding of assignment sales and be well-equipped to make an informed decision about your real estate investments.
What is an Assignment Sale?
An assignment sale refers to the transfer or “assignment” of a contract to purchase a pre-construction condominium suite. In simple terms, it allows the original buyer (assignor) to sell their contract to a third party (assignee) before the condominium is built and registered. During an assignment sale, the assignor transfers their rights, including the deposit, to the assignee, who assumes all obligations under the original agreement with the builder or seller.
Reasons for Assignment Sales:
Assignment sales serve as a solution for various scenarios that may arise during the pre-construction phase. Here are a couple of common reasons why buyers opt for assignment sales:
- Change in Circumstances: Life can be unpredictable, and situations such as job relocations or changes in family size might necessitate a sale. Assignment sales provide flexibility for buyers who need to transfer their contract to accommodate new circumstances.
- Investment Opportunities: Buyers who recognize potential profit margins in the real estate market may purchase pre-construction units with the intention of selling them at a higher price through assignment sales. This strategy can be lucrative if the market appreciates during the construction period.
Advantages for Buyers:
- Lower Competition: Assignment sales typically have fewer buyers in comparison to the highly competitive resale market. This reduced demand can provide buyers with an opportunity to secure a desirable property without getting caught up in bidding wars.
- VIP Incentives: Buying through an assignment sale often grants buyers access to VIP incentives offered by the builder, such as warranties, credits, upgrades, and more. These perks enhance the overall value of the purchase.
- Faster Possession: Unlike traditional pre-construction purchases that may require several years for completion, assignment sales often result in quicker possession of the property. Occupancy dates can be just a few months away, allowing buyers to enjoy their new suite sooner.
- Potential Cost Savings: Buyers may benefit from tax savings, such as reduced GST and HST, when acquiring a pre-construction unit through assignment sales.
Advantages for Sellers:
- Access to Equity: Sellers who no longer require their pre-construction unit can sell their assignment, enabling them to withdraw their equity and avoid carrying costs associated with occupancy fees.
- Minimized Closing Costs: By selling the assignment before the final closing date, sellers can bypass expenses related to obtaining a mortgage and other closing costs, thereby maximizing their profits.
- Flexibility: Assignment sales offer sellers the freedom to sell their units during or before interim occupancy, providing them with more options and greater control over their real estate investment.
Conclusion:
Pre-construction assignment sales provide an attractive opportunity for buyers and sellers in the real estate market. With the ability to transfer contracts and rights before the completion of a condominium, buyers can secure a brand-new unit faster and potentially save on costs. Sellers, on the other hand, can access their equity without incurring hefty carrying and closing costs.
