Buying a new home or condo before construction is complete has seldom been easier. Now if the unit you want is gone, you could purchase it from the original buyer by arranging an assignment of purchase contract.
Making Offers on New Home Assignments
You’ve seen it before. Developers of new homes and condos list their units for presale. The homes sell out in days or hours, leaving disappointed prospective buyers like you behind. Fortunately, if new home buyers change their mind or have financial issues, you have the opportunity to buy into a project even when the presale units are all sold out.
If you missed your chance to sign an agreement of purchase and sale on the unit of your choice, ask your real estate agent about buying an assignment. You can also check the MLS (Multiple Listing Service) for assignment of purchase and sale agreements in Ontario. Just Google the buildings that interest you.
Because the buyer has already paid the new home price, second purchasers can sometimes get bargains by making offers on assignment of purchase agreements. Bidding wars can drive up the price of new home units, but assignments may go for the original selling price or, if prices have since gone up, a markup over the original price. Purchasers anxious to resell their unit as quickly as possible may even agree to a lower price in exchange for a guaranteed sale.
Understand Homebuyer Rights and Obligations
Provided the builder agrees to the sale, assignments allow you (the assignee purchaser) to assume all the rights and obligations of the original buyer. Your offer can be open for an irrevocable period of between 24 to 72 hours or less in especially hot markets. The seller can accept or ignore it or make a counter offer during this time. You cannot revoke your offer unless you do so before the seller signs it and you pay any deposits.
If the seller has invited multiple bids, you may be asked to increase your offer, pay in cash or close the deal sooner. Axess Law real estate lawyers in Greater Toronto Area can review your contract before you make any costly commitments.
Once the agreement is signed, you become responsible for following through on the assignment purchase contract. Besides the deposits the original purchaser paid, you or the first purchaser usually pay a builders’ fee of $2,500 to $5,000 to draft the assignment agreement. Any construction deficiencies, delays, builder’s price adjustments or move-in problems after you buy the unit are yours to resolve with the builder. You pay the land transfer tax when construction is complete and the sale is closed.
Including Conditions in Assignment Agreements
When you make an assignment of sale contract, you are buying a home with new home warranty protection from Tarion. Pre-home inspections are part of Tarion’s mandatory homeowner coverage. If you desire and the builder consents, you can arrange your own inspections as well.
You may even be able to include conditions in your offer, such as obtaining mortgage financing or making the sale subject to satisfactory inspection reports. In early construction stages, you might be able to negotiate finishes, colour schemes or add-ons to the home design. You are unlikely to be able to assume the first purchaser’s mortgage or rent to own with an assignment contract, but that doesn’t prevent you from asking. Our lawyers can draft an assignment agreement of purchase and sale for any situation.
Once the agreement of purchase contract is signed, you are locked into buying the home unless the seller or builder agrees to change or cancel it. Axess Law real estate lawyers are skilled at reviewing contracts. They can advise you if your deposit is at risk if you decide to back out or “subject to” conditions like mortgage financing or a property sale are delayed. Be sure your assignment agreement is conditional on review by an Axess Law lawyer before you sign it.
What If the Deal Collapses?
Assignment contracts are considered frustrated if it is not possible to close the deal through no fault of your own. For instance, if the home is damaged by flood or fire or the building site is so badly contaminated that construction is impossible.
Backing out of a contract also frustrates it, but you could be sued for any difference between how much you offered and what the next buyer agrees to pay, plus court costs. Courts may also award costs for deposits the first purchaser made on another home, lost opportunities to sell the property to other buyers or expenses such as storing furniture while the home is resold.
Consider getting bridge financing to prevent a lawsuit if your circumstances change or talk to an Axess Law lawyer if the builder reneges on their contract. We can discuss legal remedies with you, online through a convenient video conference call or in person at our Greater Toronto Area law offices.
Advantages of New Home Assignments
Assignments of purchase agreements give you the advantage of being the first owner and occupier of a home or condo. You can move into your home with the confidence no one has lived there before you and all of your chattels and finishes are brand new.
Since the transfer of ownership occurs before your home’s construction is complete, you take possession of a brand new home. No point worrying that the owner will take fixtures or chattels like ceiling lights or appliances. The builder is working for you.
Although less popular, assignments are also possible for resale homes. Ask your real estate agent if they have any resale homes you might consider.
Will I Pay GST/HST?
Should HST be due, you may be responsible for paying it or the builder may include it in the unit price. Your real estate agent can usually explain if GST/HST applies or ask Axess Law. Our virtual real estate lawyers can connect with you virtually anywhere in Ontario.
Is There a Cooling Off Period?
Purchasers of new build condos have a 10-day cooling off period to withdraw their offer. Axess Law can review contracts for other properties to determine if there is a cooling off period and when it ends.
Talk to Axess Law About Your Assignment to Purchase
Axess Law has real estate lawyers near you who can review draft assignment agreements and help you negotiate with builders or sellers. Call us for a remote or in person appointment today.