6 Key Questions About Assignment Sales in Ontario—Answered

Assignment sales have been part of Canadian real estate for some time. But, it’s hard to pinpoint their exact origins. 

They likely came from basic contract law. It allows transfers of rights and obligations. But, they can’t break the original agreement or harm the other party, like the developer.

Pre-construction condo sales are rising in Canada. This has made assignment sales more popular. 

They offer a great opportunity for investors. Additionally, you can buy pre-construction units at a low price. Also, you can resell the contract to another buyer at an increased value.

This leads to a common question: “Are buyers paying a lot of money for assignment sales?” It’s uncertain. 

Assignment buyers do pay more than the original price. But it can still be a good deal if the market value has increased or if they want the unit sooner.

Many people have questions about assignment sales. This can make them hesitant to consider this option. 

Assignment sales in Ontario can be confusing. But, understanding them is essential if you’re considering this real estate option. 

Below, we answer six common questions about assignment sales. We’ll keep it straightforward.

1. What is an Assignment Sale?

An assignment sale occurs when a buyer sells their contract to buy a property before the sale closes. 

The original buyer is the assignor. Additionally, they transfer their rights and duties to a new buyer, the assignee. This means the new buyer will complete the buy from the builder or original seller.

The original buyer assigns their contract rights to the new buyer. The owner has not yet sold the property. The transfer only involves agreeing to buy it.

2. Why Do People Choose Assignment Sales?

There are several reasons people opt for assignment sales. Often, the original buyer’s circumstances change. Also, they might no longer need the property or can’t afford it. Instead of backing out and losing their deposit, they sell their contract.

What are other common reasons? Sometimes, buyers see a profit opportunity. If the property value has increased since they bought the contract, they can sell it for more. It allows them to make money without ever owning the property.

3. Are There Any Benefits to Buying an Assignment Sale?

Yes, there are benefits to buying an assignment sale. You can get a property below its current market value. The original buyer purchased it earlier. So, their price might be lower than today’s market rate.

What are other advantages? Another advantage is that you get a brand-new property. You get it without waiting for construction to finish. 

If the building is almost done, you can move in sooner. The buyer compares this to a pre-construction unit from the builder.

4. What Are the Risks Involved in Assignment Sales?

Like any investment, assignment sales come with risks. However, one risk is that the property’s value might not increase as expected. 

The market can be surprising. If values drop, you might not make a profit, or you could even lose money.

Are there other risks? Another risk involves financing. Some banks may be hesitant to finance assignment sales. They might need higher down payments or stricter terms. It’s essential to check with your lender before committing.

5. How Does the Assignment Sale Process Work?

The process starts with the original buyer finding a new buyer. Once found, they negotiate the sale terms. 

After agreeing, they sign an assignment agreement. This legal document outlines the terms. Additionally, it also transfers the rights.

What happens after signing? Next, the builder or original seller must approve the assignment. This step is crucial. 

Without their approval, the assignment cannot proceed. Once approved, the new buyer takes the original buyer’s contract. They will complete the buy as per the original terms.

6. Are There Any Costs Involved in Assignment Sales?

Yes, there are costs associated with assignment sales. The original buyer might ask for a higher price than they paid. This difference, called the assignment fee, can be a significant cost.

What other costs do we need to consider? Additionally, there might be legal fees. Both the assignor and assignee need lawyers to handle the paperwork. 

Moreover, the builder might also charge an assignment fee. Alos, buyers face common expenses. 

These include land registration fees and settlement charges. However, you must consider all these expenses in your budget.

Conclusion

Assignment sales can be great for both buyers and sellers in the Canadian real estate market. This is especially true for pre-construction condos. 

Understanding the process builds confidence. It guides transaction navigation and empowers informed decision-making.

Well, it is important to consult with a lawyer and a realtor who knows about assignment sales. They can help you with legal details. 

Additionally, they can spot risks and benefits. Also, they can help you reach your real estate goals.