realtor handing over keys to the new buyer

What Is An Assignment Sale? 

Are you a first-time homebuyer in Canada exploring different ways to purchase a property? If so, you might have come across the term “assignment sale” and wondered what it means. Most real estate transactions in Canada are straightforward, except an assignment sale. However, it opens up new housing opportunities, which is worth the complexity. Let’s break down what an assignment sale is, how it works, and what you need to know as a buyer.

What is an Assignment Sale? 

An assignment sale occurs when the original buyer of a property also known as the assignor sells their rights to the purchase to another buyer also known as the assignee before the original transaction with the developer or builder is completed. In simple words, you’re not buying the property itself, but rather the contract to purchase the property.

A larger deposit 

Assignment sale buyers are required to put down 20% of the current price as deposit, which is equal to the amount the original buyer paid in instalments to the builder. Let’s understand with an example:

Buyer A purchased a pre-construction condo at $500,000 two years ago. Over the last two years, they paid 20% in deposit. Now, the condo’s price is $550,000, which means you’ll have to pay $27,500, which is 20% of the current price. 

underconstruction detached house in canada

Why Choose an Assignment Sale?

For buyers, assignment sales present an opportunity to acquire a property that is brand new and never previously occupied. Many of these properties feature extended closing periods, meaning you could anticipate a wait time ranging from six months to two years before you can move in. This means the property will be priced lower than current market rates. 

Sellers may choose to sell if their finances have changed, they make urgent relocation plans, or simply change their mind about the investment. 

Process of Buying An Assignment Sale

Assignment sales for pre-construction townhomes, semi-detached, and detached properties come by rarely. Work with an experienced realtor who can find you exclusive opportunities through their network. 

  • Find an Assignment Sales 

Most assignment sales aren’t listed on traditional real estate platforms like MLS and Realtor.ca. They are posted on Facebook groups, brokerage websites, and sometimes shared among realtor-exclusive groups. 

  • Understand how payment works 

The price you pay is based on the original purchase price agreed upon by the assignor and the developer and any extra amount the assignor charges based on regular market growth and desirability of the property and neighbourhood. That doesn’t mean there’s no room for negotiation. You can still negotiate but since these deals are quick in nature, you won’t have time for back and forth. 

  • Consider the legalities 

As we mentioned before, assignment sales can be more complex legally and financially. It is important to work with a real estate lawyer who has experience in these transactions. They will walk you through the contract and make sure you are protected. 

a builder in gta discussing building blueprint with subordinates
  • Approval from the developer

The property developer has to approve the assignment sale. Most have specific conditions or fees associated with the assignment process that both the assignor and assignee must agree to. 

  • Closing the Deal

Like any real estate transaction, an assignment sale concludes at the closing, where the assignee becomes the official buyer of the property. Apart from the purchase price, you’ll also be responsible for closing costs, land transfer taxes, and any other fees outlined in the contract.

Are assignment sales worth it? 

If you missed purchasing a property during its pre-construction stage, you can still purchase it as an assignment. It might be listed at a higher price but it will still be worth more when completed. Since they are sold non-traditionally, you might be able to escape bidding wars and negotiate a fair price. You will also inherit builder incentives and benefits including decor dollars, 7-year long Tarion Warranty, and capped development charges. Considering all these advantages, if you have a good chunk of savings, assignment sales are worth all the trouble. 

If you are interested in buying assignment sales in GTA, our sales team is happy to help you. Please get in touch for a free consultation with our experienced team.

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