Selling a property before you take possession? Axess Law’s real estate lawyers can make it work.
When you buy a property, you agree to take possession by a certain date. If you change your mind, you may lose your deposit and be sued. An assignment prevents this by allowing you to sell your interest before your possession date.
As long as your contract doesn’t restrict an assignment, you can assign any property before you take possession. This includes resale homes. In fact, some real estate speculators make money by betting that prices will go up between the time they buy a property and the time they assign it.
How Assignments Work
Let’s say you buy a presale condo. While you are waiting for it to be built, you lose your job. Since the condominium isn’t completed or registered, you don’t own it yet. So rather than giving up your purchase deposit, you sell your contract and get some or all of your deposit back. The new buyer takes over your agreement of purchase and sale as is.
You can even assign your property after you have moved in, as long as you haven’t taken final possession yet.
When you assign a property:
- You pay the developer the full purchase deposit.
- The new buyer (the “assignee”) refunds your deposit, plus or minus any profit or loss you made on the assignment.
- The assignee pays the land transfer taxes and typically HST. They pay the balance owed for the property, receive the title and take possession.
- You pay a real estate commission and legal fees.
- The developer may also charge you a fee and request to approve the buyer.
- On the upside, you avoid carrying costs (“occupancy fees”) while the unit is built but not yet registered.
- And, the assignee pays the closing costs.
You’re free to move on or re-invest.
Axess Law reviews these details with you and makes all of the necessary legal arrangements. Our real estate lawyers handle any problems that arise with the assignee or developer.
Setting a Price
Assignments can sell for less than you paid, especially if real estate values have declined or you are competing with other sellers. Buyers may also offer less since the building is unfinished.
On the other hand, prices may have increased from the time you signed the Agreement of Purchase and Sale and the time you assigned this agreement to another purchaser, resulting in an assignment selling for more than you agreed to pay the builder. Additionally, because the assignee is taking over your contract, they can’t negotiate with the developer. They can only negotiate the price with you, giving you (the assignor) a chance to profit. Ultimately, it’s wise to consult a realtor to help you decide on a fair price.
Tips for Selling Assignments
- Don’t delay if you want to assign your contract. The developer may not consent if your unit is nearing completion or your sale competes with their marketing of unsold units.
- Check if your agreement of purchase and sale restricts advertising or prevents listing assignments on MLS. Your agreement may be cancelled and you may lose your deposit if you do so.
- Word of mouth is a powerful way to sell an assignment. Tell your friends and colleagues to spread the word.
Look for realtors who specialize in assignments and can help you find a buyer.
Click here to learn more about Axess Law’s real estate law services.