Turning Contracts into Cash: The Assignment Sale Revolution
What is an Assignment Sale?
An assignment sale is when a property buyer sells their rights to a pre construction property to someone. There are two terms Assignor & Assignee. The original buyer is the Assignor. They transfer their duties and benefits from the Agreement of Purchase and Sale to the new buyer. We called the new buyer Assignee. Assignment sales are often linked to pre-construction condos but can involve other types of properties as well. In assignment sales, there are two closings. The first is between the assignor and assignee, and the second is between the assignee and builder. Interim occupancy is provided, allowing the buyer to move in before the official registration.
Why Choose an Assignment Sale?
Assignment sales provide flexibility for buyers and sellers. There are several reasons to consider an assignment sale. These reasons can include changes in personal circumstances, financial factors, and investment strategies. An Assignor may want to take advantage of increasing market values. Speculative investors may want to make faster profits.
Navigating the Process
Selling an assignment involves various considerations:
- Builder Approval and Fees: Check if the builder allows assignments and if there are any fees associated with them. Approval from the builder is often necessary.
- Marketing Restrictions: Builders might restrict marketing, affecting buyer reach. Ensure compliance to avoid contract breaches.
- Negotiation: Assignees usually assume the contract’s terms and pricing. Assignors can negotiate a price with the new buyer.
- Legal and Agent Fees: Legal and agent fees can be higher for assignments compared to resales because of the complexity of the transaction.
- Tax Implications: Consult an accountant for tax advice regarding the tax implications of assignment profits. New rules apply to the taxation of these profits.
Advantages and Disadvantages
Pros of assignment sales:
- Early profit realization.
- Avoidance of land transfer taxes and HST.
- Flexibility to adapt to changing life circumstances.
Cons of assignment sales:
- Limited buyer pool due to substantial cash requirements.
- Marketing restrictions can hinder the sale process.
- Possible lower selling price compared to resale.
Assignment Sales Beyond Condos
Assignment sales go beyond condos. They can happen with different types of properties. Sellers should be cautious about restrictions, market trends, and legal considerations. We recommend to maximize profit, working with experienced agents and legal professionals.
Conclusion
Assignment sales are useful in pre construction real estate. They allow for making a profit and adapting to changes. Buyers and sellers have to consider the legal, financial, and market aspects when dealing with them. Consulting experts in the field can ensure a successful transaction. To gain a better understanding of the real estate market, visit preconrealestate.ca.
