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Everything That You Need To Know About Assignment Sales
A lot of times, you will see both investors and end-users discussing assignment sales. But what are assignment sales? Due to market pertaining to Toronto condos for sale, which has seen a rapid increase in pre-construction condominium sales, the number of assignment sales has increased. Assignment sales provide a great investment opportunity to the buyers of Toronto condos. However, before going ahead with an assignment sale, make sure you are aware of everything related to it.
What is an assignment sale?
It is basically a contract deal to purchase a condo in it's pre-construction phase from the original purchaser who bought it from the builder the first time, and it is to be done before final closing. It also means that the development hasn't been registered as of now. Therefore, no one is allowed to take ownership of the suites. Interested buyers can only purchase the original contract and any amendment's made with the original purchaser. As per the contract, the original buyer is the assignor, and the second buyer is the assignee. This type of sale allows people who own a unit to sell the house before actually taking possession of it. Once the construction of the building is completed, and it has been registered, the ownership title can be transferred. However, until then, it is just going to be the sale of a contract. However, there are numerous advantages to this kind of an assignment sale for both the buyers and sellers when the talk is about Toronto condos. Keep reading to find out more about it!
The reason behind such sales
There are numerous reasons for why one would sell their rights to the condo unit even before it is completed. If someone is relocating to a new place due to work or any other reason, they might have to sell their rights to the unit they purchased a long time ago.
So, to afford another property, they will have to sell their rights. This is just a single example. People can have their own reasons to sell their rights for their Toronto condos. But, one thing is for certain, assignment sales are gaining popularity at a significant rate.
The size of the family can also increase if a person gets married. In such cases, a one-bedroom unit might not be sufficient. So, there wouldn't be any point in keeping rights to a pre-construction unit when considering Toronto condos for sale.
At such times, the "assignment clause" in the purchase agreements of Toronto condos can be really beneficial. It permits the buyers to pass the contract to another interested buyer without having to suffer any financial penalties.
Assignment sales are completely legal, and they are becoming more and more common these days. However, it will always be beneficial to work with someone who is able to protect your interests at all costs. Since these Toronto condos for sale are always a lot more complex compared to a conventional resale, you should always have an experienced lawyer or realtor with you. It doesn't matter whether you are the buyer or the seller; you shouldn't have to suffer a loss in an assignment sale or purchase.
There are three different parties involved in an assignment sale: the assignor, assignee, and developer. Moreover, this is a two-stage process that includes both the final closing as well as interim occupancy.
Every person who is looking to buy or sell any of the Toronto condos that are in pre-construction stage as an assignment, make sure that you consult an expert in the real estate industry. Also, the majority of the developers allow assignment sales nowadays. There are still a few specific laws in place that will be mentioned in the original agreement. So, make sure that you go through it thoroughly, and all the issues are avoided.
An example to demonstrate assignment sale
Let's try to understand this with a simple example related to Toronto condos. Bruno Wilson purchases a condominium that is in its pre-construction stage from XYZ Development Corp in Toronto. He makes this purchase for $600,000 and initially makes a down payment of 20%. That is, he makes a down payment of $120,000. He makes this purchase in the year 2018, and the condominium is expected to be available for residing in the year 2023.
Here’s the scenario:
Assignor or the original purchaser here: Bruno Wilson
Builder: XYZ Development Corp
Original sale pricing (set by Builder for Assignor): $600,000
Original deposit that Bruno paid to the builder: $120,000
Funds that are remaining to be paid by the year 2023: $480,000
However, in the year 2020, Bruno planned to change his job. So, he got relocated to a new city altogether. Now, he can't really afford to purchase a new condo as well and, at the same time, hold onto this pre-construction condominium as well.
One good thing about Bruno's contract with the builder is that there are no such restrictions, and Bruno can assign his pre-construction condo to another individual while the condo isn't ready for possession. That is before the builder gets the construction registered.
Now, the assignment agreement has the price at $700,000
The Assignor: Bruno Wilson
Assignee, or the new Purchaser: Janice Brown
Builder: XYZ Development Corp
Assignment Total Deposit to be paid to Bruno Wilson by Janice Brown: $220,000.
This amount needs to be paid immediately. Now, the deposit made by Original Buyer was $120,000. The profit amount is $100,000 in this case.
To calculate the profit, minus the Original Purchase price from Assignment Purchase Price of the pre-construction condo. One can consider negotiating the amount as well as the timeframe for making this payment.
When the construction gets completed in the year 2023, Janice will be able to move in during the 'interim occupancy' period of the construction. It will now be Janice's responsibility to make the registration for the mortgage and start paying the mortgage installments for the condominium.
Understand the assignment's critical details here. The condominium is complete by 2023 and is available for interim occupancy. Janice will make the decision to shift to the condo in this period. It will be during this period that Janice will have to start paying the mortgage deposits also.
Once the building gets registered in 2023, there is an official transfer of title that takes place between the developer and the new purchaser. Janice will have to pay her mortgage deposits as well as the condo fees applicable.
Janice will have all the rights to this condominium now. Therefore, she can even consider a resale of the property, and this kind of transaction will go through a regular procedure only.
It’s crucial to know the details
There are many other details involved in the whole process of Toronto condos for sale. For this, it is always advisable to reach out to your agents or real estate experts who can guide you through the process and help you make better decisions. Each assignment has its own set of costs involved. There are different rules and conditions too. Thus, it is essential to look into each detail properly before making the final purchase.
Seek expert advice
If you are someone who is planning to either purchase or sell a pre-construction condominium assignment, get in touch with your real estate agent as well as your tax accountant. They will give you a better idea about the profits that you will be making from the Toronto condos’ sale or purchase of the assignment.
Most builders do not restrict Assignment sales. However, before getting into it, do read through the contract properly and manage the transactions for it properly.
Does buying an assignment make sense?
You can get some of the best deals in assignment deals. Moreover, especially in the Toronto condos market, there are plenty of such sales upcoming. All the people won’t be experts either since the trend has just started.
There is also the chance that there will be high demand in the Toronto condos market. This can get to buyers into a bidding way, and it will lead to people overpaying for their properties. However, investing at the time of an assignment sale can eliminate this excessive bidding between the interested buyers. So, you will not have to overpay for your condo suite.
This market can provide a major boost for the buyers as well as sellers. Since the seller is trying to make a sale of the contract, he or she can do it without having to wait for the project to be completed. On the other hand, the buyer will be able to save time and reduce the chance of overspending.
There are other benefits as well as buying an assignment agreement. You will get a new condo suite that will have the Tarion Warranty Program for seven years. Moreover, you will get to shift into the new condo sooner. You won’t have to wait for 3 to 4 years for the construction to be completed.
What are the advantages of these sales for buyers?
Here are some of the crucial benefits of assignment purchases for buyers:
- You will get the unit for a lower price since there won't be much competition.
- There will be a decent number of choices as there will be a shortage of listings in the market.
- In fact, in case the construction isn’t completed to a great extent, you will have to option of selecting your own finishes, upgrades, colors, etc.
- There won't be any bidding way. So, you won't have to overpay or go over your budget, either.
- You will also have room for negotiations with the sellers. These people are looking to drop their equity. Therefore, you can set leverage on the closing dates, prices, and deposits.
- You will also get the VIP benefits, including the Tarion Warranty Program for seven years. Some of the other benefits include upgrades, credits, capped developing charges, etc.
- In fact, you will get the tax benefits by saving on HST and GST.
- Lastly, you will get a brand new unit for yourself and that too earlier than most cases. Your occupancy might just be a few months away instead of waiting for years.
Selling an assignment
Gone are the days when pre-construction Toronto condos had to be just kept as it is for months or years till the final closing date for it arrives. By this time, there are a lot of funds that one already spends on the occupancy fees as well as closing costs.
This is the reason Assignment sales are quite popular in a fast-paced place like Canada. Thus, it becomes important to understand the concept of it properly. Take your time and learn all that you can about selling an Assignment.
The trend of selling an assignment is on the increase in Canada now. The majority of the builders in the country allow sales of assignments. Though there are different rules that are put by different builders, multiple options are still available for you if you wish to sell your condominium as assignment.
Tips to make it easier to buy a new condo on assignment sales
Here are a few key points that you should keep in mind at the time of buying a new condominium on assignment sale.
- Don’t think that you are purchasing a resale condo
You are getting yourself a brand new condo. So, you will get the ownership from the Final Closing Date itself.
- Keep in mind the closing date
Before purchasing a unit on assignment sale, keep it in mind to know the closing date for assignment and occupancy. You should also know the final closing date for the property.
- Have sufficient funds for the down payment
You will have to make a substantial investment if you are looking to purchase a condo unit. First of all, you will have to pay 20 percent of down payment paid by the assignor to the builder. You will also be responsible for the difference in the amount of the new purchase rate or the asking price for the unit and the original value.
- Don’t hurry it up
This is a considerable investment for most buyers. So, make sure that you consider all the aspects before making a purchase.
- You need the consent of the builder
For a successful assignment transaction, you will need the approval of the builder. Make sure that you look into this aspect so as to ensure that there are no confusions.
Assignments’ sale and purchase in Canada has been on a rise since the past few years. Therefore, it has become crucial that you know properly and correctly as to what the concept behind Assignments is and how does it all work for Toronto condos for sale.
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