It’s pretty easy to see that Hamilton and the surrounding area are in a pre-construction boom. With so many new condos and townhouse developments, it’s an exciting time to be a buyer. 

One aspect of pre-construction home sales often overlooked or misunderstood is the concept of an assignment sale. What is an assignment sale? How does it work? Why would you need one? These are all questions you might ask yourself as an interested pre-construction buyer or investor. 

Here’s a quick guide to everything you need to know about assignment sales…

How is Pre-Construction Different than Buying Resale?

Before we get into what an assignment sale is, you need to know one of the key differences between buying pre-construction and a re-sale home. For pre-construction, you are essentially buying the idea of a property. Since, in most cases, it hasn’t actually been built yet. 

Most pre-construction condo projects go through a sales phase before even breaking ground on construction. For the purposes of financing, most pre-con projects won’t even start until they are about 80% sold. 

For buyers, this means they need to put down a big investment before seeing their new property. And then on top of that, they often need to wait, sometimes months, before taking possession. 

We’re your local pre-construction experts. Take a look at this case study on how we sold 13 pre-construction condos in 48 hours. 

So, What is an Assignment Sale?

An assignment sale happens when the original purchaser of the pre-construction property sells it before ever taking possession. In this case, the original purchaser is known as the assignor, and the new purchaser is the assignee, and the sale happens before the project actually closes. 

Assignment sales can happen between private sellers or between property management firms and private buyers. Either way, if someone purchases a pre-construction building, and then sells it before title closes and changes hands from the builder to another party, it constitutes an assignment sale. 

Hamilton and the surrounding area are continuing to expand! Check out some of our neighbourhood blogs here to find out what you can expect from the local communities;

• What to Expect When Buying a Home in Waterdown
• Our Complete Guide to Central Hamilton
• 5 Things You Need to Know About Hamilton Real Estate

Why Are Assignment Sales Beneficial? 

You might ask yourself, “why would someone buy a pre-con condo if they never intended to see the transaction through to the end?” And that would be a valid question. On the surface, it seems kind of backward. But when you really consider the benefits for both assignors and assignees, it starts to make more sense. 

For the Assignor

In many cases, developers offer exclusive deals and offers to entice buyers to act early on a pre-con project. This could come in the form of special financing or free upgrades. From there, the value of the property only continues to go up as it’s built. So for assignors, if they have the capital, they can often get in early on a pre-construction project and then sell it for a profit. 

Assignment sales are also helpful in case the assignor’s life situation changes between the time they register and invest in a pre-con condo and the time they are supposed to take possession. For example, perhaps they get a new job or have a life change that requires them to move somewhere different. Or maybe they are a real estate investor who has changed their mind and would prefer to sell rather than rent. 

There are often months in between investing in a pre-construction project and moving in. Life can change, so it’s nice to know you have the assignment sale option in your back pocket. 

However, there can be HST implications with an assignment sale, and it is always best to discuss with an accountant prior to making the decision to assign a property/

On the fence about whether condo life is right for you? Check out our blog about Upsizing 101: 5 Tips for Moving From a Condo to a House here.

For the Assignee

Assignors aren’t the only ones who can profit. Assignees can also maximize the benefit in these situations. Investing in a pre-construction condo or townhouse has certain risks involved. What if the project doesn’t receive full financing? What if there are unexpected setbacks and it takes even longer to build? The original purchaser of the condo is the one assuming all the risk here. 

As an assignee, you would get more peace of mind purchasing a condo closer to the closing date since the project will probably be on more solid ground by that point. Although you will probably pay a little more than the original purchaser, your transaction comes with fewer risks. 

The Best Way to Navigate an Assignment Sale

When it comes to successfully navigating an assignment sale transaction, your best course of action is to work with a real estate professional who is experienced and familiar with pre-construction projects and assignment sales. 

As an assignor and an assignee, you want to ensure your best interests are protected and your investment is sound. An experienced professional can advise you on whether or not an assignment sale is an advantageous investment or if you’re better off looking elsewhere. 

Ready to make a move in real estate? Here are some resources to help get you started:

• What are Buyer Representation Agreements and Listing Agreements?
• Why You Should Work with a Local Agent
• How Seller’s Can Make the Most Out of a Hot Market
• 7 Real Estate Terms Seller’s Often Misunderstand

Interested in learning more about buying and selling pre-construction? Contact us today here to learn more.