What is Pre-Construction Condo Assignment in Toronto in Layman’s Language? Free Assignment may not be Free!!!!

Saturday Aug 05th, 2017

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What is Pre-Construction Condo Assignment in Toronto in Layman’s Language? Free Assignment may not be Free!!!!

When you are looking to buy a condo in Toronto there are two kinds of sales available on MLS. Basically, you can either buy an already occupied called resale condo or you can buy a condo that is not closed even if the interim occupancy has taken place.

A lot of you have asked me about Condo Assignment and I thought it to be a good idea to put it in my blog.

Condos have become a part of downtown lifestyle. All young and not so young are lining up at the new launches of pre-construction condos! A lot of buyers feel that an assignment is when they can sell their Agreement with the Builder to a new Buyer. No, Its not that easy. We got to read the Agreement to see what all is included in the assignments. Some builders won’t let you sell till 95% of the units are sold. Some may only allow the assignment at Occupancy or just before closing. There are reasons why the Builder do this. Mostly its done so that the builder can make more profits by selling the unsold units instead of letting you assign your unit at a premium. When you hear free assignment it’s not free as you still have to pay to the Lawyer and to your salesperson his commission.

Its important to remember that all sales person are not experienced in assignment sales. Very few agents have a clear idea how it is done and some of them might try to get it listed least realizing the builder’s permission is needed in writing for assignment to be put on MLS. Some may even be confused as to who is the assignor and who is the assignee?

Let me explain in brief as to what is assignment? What is needed to do the assignment and how the payments are calculated.

Let’s follow step by step.

Buying Process.

You go buy a pre-construction condo. You sign the Agreement of Purchase and sale. The deal firms up after 10 business days.  The Agreement of Purchase and Sale contains the price, terms and conditions, a deposit, Floor plan etc.

Waiting Time.

You wait for the construction to begin. Construction begins and prices move up. Before Occupancy you decide to sell the condo as you need money and the condo prices have moved up. This is the time you decide to assign you condo purchase. You now look for an experienced salesperson. You can visit my visit my website http://www.247torontohomes.com to contact me.

Three parties involved.

There's basically three parties involved. We have got the assignor, who's the person selling it. We've got the assignee, the person who's buying it. And you've got the developer/builder agreeing to allow the assignment to take place. The assignee is also required to have a lawyer to close the sale.

Complications Involved.

Because of the complicated nature, assignments aren’t very common. Roughly, the number is not more than around 5 to 7 per cent of total sales. Let me explain how it gets complicated.

With an assignment, the Seller is selling their interest in a property (i.e. Their contract with the builder). They aren’t selling the actual property (as they don’t own it yet); they are selling their promise to purchase a property.

When you purchase an assignment, you are essentially accepting the terms and conditions of the original Buyer. Renegotiating the price or terms of the contract is not possible. The Agreement of Purchase and Sale is taken over as it is.

New Buyer must be careful as some builders won’t allow their original purchasers to assign contracts, or will only do so for a fee (assignment fees varies from $0 to $10,000). Some builders also insist on selling 90-95% of the product before approving an assignment sale. Builder approval to assign a contract is almost always mandatory.

Miscellaneous Risks and Advantages.

To Conclude some of the following miscellaneous issues must also be considered.

  1. Original buyer had to pay land transfer tax. Because no land ever exchanged hands, the original purchaser will get an opportunity to avoid paying land transfer tax This can be discussed at the time of price negotiations.
  2. The New Buyer takes on additional risks of buying a pre-construction condo like time delays, cancellation of the project, changes to the unit or building, interim occupancy time frame, and a whole lot of other new developments.
  3. The New Buyer may not be able to get the finishes and upgrades of his choice as this is sometimes already done.
  4. Closing costs associated with Pre-Construction condo sale is different from a resale condo. You will have to consider builders adjustments, development and education charges, HST, Utilities connection fee and Tarion Warranty fees. You will have to carefully look if these costs are capped as the increases can be substantial.
  5. Buying an assignment can be a great way to get into a building where there is no possibility of buying a brand new condo. Sometimes it pays to buy an assignment and then sell it at premium in future,
  6. If in future you are considering buying or selling on assignment a condo of your dreams in GTA, you can be greatly benefitted if you have a Real Estate Salesperson with experience with you. It will greatly reduce the risks and related complications.

For all your questions or queries feel free to call me or any of my team members by visiting http://www.247torontohomes.com


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