More Canadians are taking advantage of condo assignments. Some may have short-term plans to getting properties instead of hanging onto for a lengthy investment. They’ve decided on an assignment sale to help them get a quick payout or get out of an investment than they anticipated. Here are some things to understand about an assignment sale in Toronto.
What Is a Pre-Construction Condo Sale?
In specific cases, they may seek pre-construction land for sale instead of buying outright. Also, they may sell their contract with the builder before officially taking possession of the property. As a result, they don’t own the condo yet.
Instead of owning the condo, they sell the Agreement of Purchase and Sale with the builder to a new buyer. This type of transaction is called an assignment sale.
Before choosing this option, buyers and realtors need to know the ins and outs of pre-construction condos. It’s wise to request an assignment clause so you can sell the unit. You may have a change of heart and not want to put too many resources into the condo.
Maybe your financial situation has changed, and you don’t want that burden of having closing costs and other fees. Also, you may want to get enough of the property to flip it and make a quick buck. You want some profit back on your initial investment to do other things with the money.
Even with an assignment clause, you still need the builder’s approval. Make sure you know the builder, and you can come to an agreement.
Things to Know Before You Buy an Assignment
Before you commit to the property, you should know some things to help you make sure that you’re on track. Here are some things to note about an assignment:
No Renegotiation
When buying a condo assignment, you inherit the contract from the original purchaser. Even if it seems like a bad situation, you have to accept it as it already exists. It’s imperative to speak with an experienced attorney who knows how to navigate these waters.
When you overlook the clause in the contract, it can leave you in hot water. Find a broker who knows both the perspective of sellers and buyers to help you predict what may happen in the worst-case scenario.
Know the Payment Structure
The average deposit up front is 15% for the first year and 5% for the remaining occupancy on a pre-construction condo. Within three years, you can expect to pay 15% to 20% on the property. Additionally, the amount you pay depends on the phase of the building when you purchase it.
You pay the Assignor the deposit they’ve already paid to date then the remaining amount goes to the builder. In rare cases, you might pay as low as 5% if that rate is in the Assignor terms. With less money down, the Assignor has to wait until registration to receive their profits.
As the registration date gets close and the builder has nearly completed the structure, this is a more likely buy situation.
Have Patience
The market is a bit different in Toronto because it’s hard to buy or sell quickly. People don’t go through a bidding war to drive up or lower the price. It’s tricky because of the small buyer pool.
Although it may seem complicated, it’s a bit easier when you know how to wait things out. When you give yourself two months on the market, it helps you lower your expectations for an immediate sale. It gives you time to find the right buyer who can accommodate your needs.
Hire A Reliable Realtor for Marketing
Marketing this offer is not going to be easy. It’s not a bad idea to go for a digital marketing campaign. You might reach more people in Toronto by posting on Facebook or Instagram. Also, listen to your realtor.
Realtors know the landscape of who wants to buy and sell properties. If you’re thinking of using this property as a way to flip it for an investor, a realtor may have contacts. They know realtors in their network that works with investors and people that buy properties for commercial purposes.
It’s hard enough trying to do everything by yourself. When you have an expert on your side, it makes the workload easier so you can focus on other things.
Find a Good Attorney
Always have a solid attorney to help you with this type of transaction. An assignment sale is a unique case that you don’t run into every day. You need the ideal lawyer who knows the legalities of an assignment.
It’s something that’s not common law. Some real estate lawyers and agents may not have dealt with this type of sale. When you can find a lawyer who has expertise in this type of real estate, be clear to pay them well. You can save time and money to help you get a great deal on buying or selling a vacation real estate.
An attorney knows the importance of buyers, sellers, and developers in this deal. Find someone who’s done several of these deals. They know things they need to look for and make sure they can cross their ‘T’s” when going through the documentation.
Pre-construction deals are unique. You need your attorney to understand the legal language in full. Also, they will know the details of the clauses.
If there are specific things that need permission, they’ll make it’s outlined in the contract. They keep tabs on everything to ensure you have the Right to Sell in black and white.
Hidden fees may arise because of selling on assignment. An attorney goes through documents to prevent you from getting hit with fees you didn’t anticipate. If they know their stuff, they may even reduce the costs in an agreement with the developer.
Build a Great Relationship with the Developer
Remember, pre-construction of a condo is a process. When you want to get an assignment sale, make sure to have a great relationship with the developer. Communication and cordial acts can help create more trust between you and the builder.
Things may delay the project, so it’s imperative to get on the right foot when dealing with specific ordeals. You may not have control over the weather, a worker quitting, or materials getting shipped over. When you have open communication, it makes things better when issues arise.
Also, the developer has the final say. You catch more flies with honey than vinegar when it comes to working with people. Even if you disagree on a few things, it’s better to be amicable about them.
Know the Closing Costs
When you get the property, you’re responsible for closing costs registered with the city. Some fees include land transfer tax, development charges, utility connection fees, and different legal fees. Once you finish with registration, that’s when your mortgage starts.
If you’re using the place as your primary residence, they don’t include HST costs. Investors have to pay HST upfront if they decide to lease the place. However, a good lawyer may be able to get the money refunded in about a month through an HST rebate.
If you’re doing that, be clear on a one-year lease.
Advantages of an Assignment Sale
With all of the things you need to look over in an assignment sale, it’s worth the hassle for a few reasons.
Cheaper Condo Price
You may get the last few homes for a price that’s below market price. You have first and last dibs on a new condo that may have been pricey in a different sale.
Buyers Have the Upper Hand
Investors may want to cash out quickly before the condo is in their possession. There’s still lots of inventory left in the building, which gives buyers options while the property is still a work in progress. If you’re an investor, you may want to talk to a real estate agent about whether it’s better to take possession or cash out early.
Customizing the Unit
If you have a good relationship with the builder, you can still customize specific parts of the building. Be clear on the zoning codes for the city. A builder may speak to you about a year before completion to know what you need in the structure.
Also, you’ll pay lower maintenance fees because the condo is new. When customizing things, talk to a realtor who knows about this process to make the transition as easy as possible.
Built-In Equity
The condo market is huge in Toronto. When you think of purchasing property, a pre-construction condo is a good investment if you decide to build immediate equity. Building equity can help you get additional opportunities.
While lots of work goes into an assignment sale, it could lead to a nice payoff. If you’re buying to lease, it can be beneficial to have an attorney who knows the risks and rewards for having the building. Think about your options before acting on your purchase decision.
We hope you found this blog post on Understanding the Benefits of Assignment Sale in Toronto Real Estate useful. Be sure to check out our post on Top 5 Best Cities in the United States for Real Estate Investing for more great tips!
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