As prices for freehold homes continue to soar, condominiums become more and more of a reality for many of us looking to stay central, in close proximity to work and play. There will come a time when while browsing for new properties you or your agent will come across an assignment sale. Let’s take a look at what an assignment is, why one would wish to sell his suite as an assignment and what the upside may be to purchasing one.
In simple terms an assignment is a purchase of a contract AKA. right to purchase a suite. When buying a brand new condominium a purchaser typically executes an agreement of purchase and sale at a sales office, is given a contract and is sent on his/her way to wait for the suite to be finished. Now as we know, many years can pass before a purchaser is granted possession. During this period of time purchaser intentions may change. Some could win a lottery, get a large inheritance and some will unfortunately lose their job or gamble their money away. As a result circumstances may arise where ORIGINAL purchaser may want to sell his suite PRIOR to final closing. He/She will be ASSIGNING the suite.
Two of the most common reasons behind assigning a suite are either an inability to close (lack of funds or inability to qualify for a mortgage) or a desire to make a quick buck (flip a condo). Let’s face it – no one likes losing money, especially if the purchaser has already provided 5-20% in deposits to the developer. If for whatever reason the original purchaser is no longer able to qualify for a mortgage, due to job loss, etc; they risk losing tens of thousands of $$$ unless they find someone to assign their suite to. These are the best types of Assignors because they are MOTIVATED. Those looking to flip will frequently linger on MLS, unaware of remaining builder inventory, market conditions, and priced way above market value.
This leaves us with one final and most curious question: Why do YOU want to purchase a suite as an assignment when you can just as easily buy resale or directly from the developer? The answer will differ for many. Some are completely overtaken by the location, amenities and look of a certain condominium project. Some are looking for a brand new suite that the developer is sold out of. However MOST are hoping to get a bargain. Kijiji and Craigslist are littered with assignment ads from desperate purchasers looking for a way to escape the firm grip of the developer and salvage their deposits. The reality of the situation is that most of these assignments will NOT sell but a select few may, and this is a chance worth taking.
Don’t misunderstand me, assignments have merit in today’s real estate market and serve a purpose. I have personally seen a colleague purchase a sub penthouse 2B condominium in a high-end development close to Bloor street at the same price as what the original purchaser paid four years ago! These rare gems are out there if you look hard enough.