In the past few years, some cities around the world have experienced booming condo construction markets. These condos are purchased by investors from around the world in addition to some local end users. For investors who bought a new condo from a Developer several years earlier and whose current plans have changed, this is an opportunity to sell before they have to incur closing costs and Developer levies. For buyers who want a brand new condo without having to wait years for construction to finish, or who cannot find what they want in the resale market, Assignments offer a greater selection AND potential savings.
An “Assignment” means you are taking over the contract that the original purchaser holds with a Developer. This works really well if you have a large cash down payment available, although sometimes a smaller amount can be negotiated. Generally what happens is you pay an amount equivalent to the purchaser’s deposits to the Developer PLUS the purchaser’s profit (the difference between the original purchase price from many years ago and today’s selling price). You then are able to move into the condo when it reaches the occupancy stage. When the building registers, you then take out a mortgage and pay the balance owing on the condo to the Developer.
It sounds complicated and it is. However, as long as you hire a real estate agent and a lawyer who are competent and experienced in handling Assignment sales, the process is very straightforward. The advantage to you is that the Assignment market tends to be a Buyer’s Market — there are often many listings in these markets and few buyers — which means that you can often get a great deal on a brand new condo with little or no competition from other buyers.
That said, locating Assignment sales can be difficult. Generally, Developers do not allow Assignments to be advertised on the Multiple Listing Service systems so these listings are offered by brokerages as Exclusive listings. Some real estate brokerages hold a large number of Exclusive Assignment listings in-house. In addition, these brokerages network on a regular basis with other agents in their market who have Assignment listings, which makes it easier to find listings that meet a buyer’s criteria.
Once an agent locates potential properties for you, if they are experienced in this area, they can help you understand the specific details offered by each Assignment such as purchase costs, closing costs, understanding floor plans, upgrades, and many other details. In some cases, the building may have reached occupancy and you can actually view the condo already built. In other cases, you will be buying from Developer plans just like buying a pre-construction condo.
When you are ready to make an offer on an Assignment, you’ll need a carefully structured Assignment contract. You then need to work closely with your Buyer’s Agent, your lawyer, the Developer’s office, and the listing agent to make sure your best interests are protected throughout the transaction.