Buying or Selling Condo Assignments
If you have made the decision to invest in property, ‘assignments’ are something you will most likely have heard about but may not fully understand. You are not alone, in fact, it is an area of property investment that not all realtors understand themselves.
Buying and selling condo assignments is an area we specialise in and with our expertise, we can show you how to reap the rewards of this lucrative area of property investment.
What is an ‘assignment’?
When a buyer agrees to purchase a condo from a builder during the pre-construction phase, they sign a pre-construction purchase contract (with a price, terms and conditions, a deposit etc.). If the buyer of a pre-construction condo changes their mind and decides to sell before the occupancy period or before the official close, they cannot sell it as they do not own the condo yet. What they can do is sell their contract (their agreement with the builder to buy a unit), this is what we call an ‘assignment’.
An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property. The assignee is the one who ultimately completes the deal with the Developer/Builder.
When done properly, assignments are legal and can be a useful tool for buyers and sellers.
Buying and selling assignments is very different from buying and selling completed condo. There are several risks and legal requirements that must be met and the paperwork is very different from the usual agreement and purchase of sale for a condo. As with any contract, it’s crucial for buyers and sellers to know what they’re signing. It’s important to know what each clause means and how it will affect you. We will explain every clause in the contract to you. Your contact will also be reviewed by a lawyer before it becomes binding. Real estate contracts are legally-binding, so getting legal advice before firming up is recommended.
What about the tax implications of assignments?
RECO advises anyone participating in an assignment to seek the advice of a tax specialist. Generally, assignors can expect to pay tax on any profits they realized from the assignment. Land transfer taxes are paid by the assignee, as they are only due when the sale closes (that is when the property actually changes hands).
HST
Because it’s a new construction condo, HST may apply. The price set out in your Agreement of Purchase and Sale from the builder assumes that the purchaser will be using the property as a primary residence and therefore, the builder will receive your property’s HST New Housing Rebate. This way, the builder does not need to charge you the HST in addition to the sale price. However, if the new build investment property will be non-owner occupied, you are required to pay the HST in full on the date of final closing and title transfer. If you sell by an assignment, you won’t be require to pay HST on final closing even if you are the investor.
If you buy an assignment and you are the investor you may be required to pay additional HST on final closing. The amount of HST the builder will charge on final closing is NOT 13% on top of the purchase price. It is calculated differently. You may also be eligible to get the money you have paid back right after closing by applying for an HST rebate. You may be eligible to receive up to $27,000 back.
We partner with the HST relief services to assist investors with closing a new build investment property by lending you the HST New Housing Rebate amount needed to close your investment property and filing your Rebate with the CRA to get your money back.
We have a wealth of experience in buying and selling condo assignments and with our expertise can guide you confidently and seamlessly through the process.
ASSIGNMENTS FOR SALE
Selling a Condo Assignment
When selling an assignment, you are selling your interest in a property (your contract with the builder). In other words, you are not selling the actual condo you are selling your promise to purchase a property.
Benefits of Selling an Assignment
Because no land exchanged hands, you will be able to avoid paying land transfer tax, you also do not need to pay any other builders closing costs and HST.
Looking to sell you condo? We can conduct a valuation and tell you the best price it can be sold for today.We will help you to weigh the pros and cons of selling by an ‘assignment’
Buying a Condo Assignment
When purchasing an assignment, you step into the shoes of the original purchaser. You cannot renegotiate the price or terms of the contract, you are simply taking over the existing contract, thus taking on all the terms and conditions that the original purchaser agreed to.
Benefits of Buying an Assignment
In most cases the actual purchase price is lower than it will be once the building has been registered and is offered for sale, giving you the buyer an opportunity to purchase property at a very competitive price, which means you can see a guaranteed profit in a very short space of time.
It is also a great way to purchase a condo in a building that has no remaining inventory.
99% of the Assignments are not on MLS simply because most of the builders do not allow these to be advertised/listed on MLS. These are so called exclusive sales.
Contact us today.We will help you to weigh the pros and cons of buying ‘an assignment’.