Buying an Assignment Condo

When buying a new condo, many people don’t consider an assignment for a number of reasons. What people don’t usually realize is that there are a lot of benefits to buying an assignment condo. We take a look at the benefits and risks to help you make the proper assessment.

Advantages of Buying a Condo on Assignment

1. You Can Purchase a New Condo for Less

When you take a look at an assignment condo, it’s more than likely that the property you are looking at will be listed for a cheaper price. When someone lists their condo on assignment, it will preferably be for a price that is lower than market price and the price of a pre-constructed one at the time.

2. Built in Equity

Purchasing an assignment sale can be positive equity right away, on paper. When you locate the right deal, you could be getting pre-construction units on assignment fair below market value, putting you in the green mark right away.

3. Buying an Assignment Gives Buyers the Advantage

The previous buyer will most likely want to get out of the contract as quickly as possible. Whether the reasons are personal or financial, this gives the buyer the advantage to negotiate better terms. Some people would rather avoid paying closing costs which can be around 3-5% of purchase price. The seller would rather avoid by assigning the unit prior to closing.

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Risks of Buying a Condo on Assignment

1. Time Delays

Your typical home that comes up for sale is a simple formula for selling. Your Realtor would stage the home and try to clean it up as much as possible then take photos then finally, list it on MLS. 

What makes assignment tough sometimes is the fact that you cannot list the property on MLS like any normal house then expect showings and receive offers. It’s all through word of mouth and requires you to work with someone that understands the niche market and has the network for it. 

This can take a little longer to sell sometimes as it will not get full exposure to the public and other sources. We take your unit and expose it in every way possible for a quick but quality sale.

2. No Negotiating Leverage

While the time and date are in the buyer’s favor, when it comes to the developer, you are pretty much locked in place. The only negotiating leverage you have would be against the seller, but not the developer of the property. 

Usually when you purchase a presale, a buyer has a certain amount of say in the color scheme, certain upgrades, parking, storage, etc. However, when buying an assignment, you take over the terms negotiated by the previous buyer whether you like it or not.

So you need to be sure you like how the condo is being built before you take the plunge. The only real negotiating room you have is the price you pay to take over the rights of the initial buyer. Again, this might all sound complicated but our team is here to answer all this in simple to understand terms. 

3. Fewer Choices

If you are solely in the market for an assignment, there will be fewer choices. Also, since the sellers of assignment condos are not allowed to market the property, you need to rely on word of mouth or real estate agents (preferably specializing in assignments).

Fewer choices also refers to how much negotiating power you get to have when it comes to your new home. You don’t get a say in the color of the walls or where your parking spot is allocated because you are basically agreeing to whatever terms the original buyer has signed for.

4. You Might End Up Paying More

We did mention how most assignment condos go for a lower price, but in the end, you could still end up paying more. The condo itself might be for less, but the legal fees and tax included could add up and run up the price. Its so crucial you work with someone that can help you understand the real value of the unit being proposed to you for purchase.

seating area of a modern condominium

Tips for Buying an Assignment Condo

1. Consider the Closing Date

The dates you should keep in mind when buying an assignment condo are: The assignment closing date, occupancy closing date, and the final closing date. There are certain procedures that need to be done before these dates and as we touched upon above, they can give you leverage against the seller.

2. It is Not Like Purchasing a Resale Condo

A resale awards you the condo itself, however, with an assignment condo, what you get is the rights to the property [1]. You don’t technically own the property or acquire the rights to it until after the final closing date.

3. Payment Structure

The original buyer would have paid 20% down payment at least for the condo. You will be responsible for that paid to the builder when you sign the contract. If there is a difference between the asking price and the original value of the property, you will be responsible for that as well.

If you buy any chance cannot afford the 20% down payment, we would suggest looking for other options.

4. Consent of the Builder

You 100% need the builder to approve the sale. The original buyer should have looked into their contract to see if assigning the property is even allowed. Some contracts will stipulate certain things so it’s a good idea to get a lawyer to look over the documents.

5. Closing Costs

When it comes to the closing between the buyer and the seller, they would expect to be given their deposit and any profit difference between the price negotiated and the original price. Then the closing costs between the buyer and the builder comes next. You will then may the remaining amount to the builder (usually with the help of a mortgage).

blonde woman wearing white looking somewhere while holding phone

6. Mortgage Approval

In order for you to be approved for a mortgage and for the builder to approve everything, you need to provide proof of income. This is just so all parties involved can be assured that you are able to afford the property and assuring the builder that you are good to close on the deals. We usually help our clients if needed by putting them in touch with a great Mortgage Broker.

7. Use a Seasoned Real Estate Broker

As we said many times, the process is significantly more complicated than resales. For this reason, we would definitely suggest using an experienced and seasoned real estate broker to facilitate the process.

8. Do Not Be In a Hurry

Since this is quite a large purchase, it’s not advised to rush into it. Make sure you have a trusted team on your side (lawyer, accountant and real estate broker) if necessary and look over all the documents thoroughly to make sure you know exactly what the terms are.

9. Customizing Your Unit

You 100% need the builder to approve the sale. The original buyer should have looked into their contract to see if assigning the property is even allowed. Some contracts will stipulate certain things so it’s a good idea to get a lawyer to look over the documents.

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