The term “assignment” in its simplest form refers to the re-selling of a contract typically used with pre-sale unit or home during the construction of a new development. An assignment occurs when the original purchaser decides to sell and/or transfers all the rights and obligations of the original (pre-sale) contract between themselves and the Seller to another party, before the official completion date of the property.
Buying An Assignment
If you are considering buying a property by way of an assignment, be aware that it is different from a typical real estate sale. In an assignment purchase you are actually buying the contract from the original purchaser and you do not own the unit or property until the unit or property is physically ready to be occupied.
Example Assignment Transaction
For instance the original Purchaser buys a home from the Developer in 2020 for $200,000 with a total down payment of 25% paid to date ($50,000), completion is scheduled for 2024. In 2022 the original purchaser decides to sell or "assigns" the property to another party for a sale price of $275,000.
To purchase the assignment the new buyer must pay the following:
25% paid to date by Original Purchaser - $50,000
Difference in Assignment Price from Original Price
New Price $275,000 less original Price $200,000 - $75,000
Total Deposit/Cost today to Purchase Assignment - $125,000
Payable to Original Purchaser to take over contract
When the property is ready for occupancy in 2024 the new buyer completes the sale with the Vendor:
In 2024 when property is complete and ready to occupy:
Original Sale Price - $200,000
Original Deposit Paid - ($50,000)
Funds required to Complete Sale - $150,000
(Payable to Developer/Vendor)
Therefore the total cost for the property is $275,000 with $125,000 due immediately (payable to Original Purchaser) and $150,000 (payable to the Developer/Vendor) due at completion.
Selling An Assignment
If you have or are thinking about purchasing a property in a new development which is still under construction and wish to re-sell your unit today, you must do so by way of an assignment sale. The first step is to confirm and clarify the terms of your contract as to the conditions and costs associated with an assignment. Usually the developer charges an administrative fee which is your responsibility, in addition to any applicable commission charges (bear in mind some contracts restrict assignments).
Assuming that your Purchase and Sale Agreement allows you to sell or assign you contract prior to completion, you may either find a buyer on your own or hire a Real Estate Company such as myself to handle the listing and sale process, for which a commission fee will be charged.
Assignments can be complicated especially if you are not familiar with real estate and all its legalities, and what I have written her is only a basic guideline. I highly recommend that you seek legal independent advice and call an independent banking representative for any financing information they may have.