How Presale Assignment Works
A Pre Sale Condo Assignment is when the original Buyer of a Pre Sale Condo sells their rights to a completed condo to another Buyer before that condo is completed. The reason the word “Assignment” is used because the original Buyer assigns their rights to the new Buyer. The Seller of an assignment is the Assignor and the Buyer of an Assignment is the Assignee.
Here's a breakdown of the steps involved in selling an assignment:
1. Review Your Contract: Begin by carefully examining your contract, specifically looking for any clauses that pertain to assignments. These clauses outline the terms and conditions for listing an assignment for sale. It's important to note that many developers require an assignment fee, while some might not allow assignment sales at all. There is usually a timeline of when you can assign. Usually when the developer has sold out all the units.
2. Seek Approval: Although an assignment clause might be present in your Contract of Purchase and Sale, developers often retain the right to refuse assignment sales. It's crucial to reach out to the developer to confirm whether you can proceed with assigning your unit.
3. List Your Assignment: Many builders in the area might not permit assignments to be advertised on MLS. However, I will help with advertising and selling assignment listings through specialized channels, private groups and my team’s extensive internal database of active condo buyers.
4. Negotiate the Offer: Once you receive an offer from a potential buyer, the negotiation process begins. This involves settling on the sale price and other terms related to the assignment.
5. Initial Deposit: When the buyer is ready to move forward with the assignment, they provide an initial deposit. This step marks the point where the conditional offer becomes legally binding. The deposit is held in trust by the buyer’s real estate brokerage.
6. Fulfill Conditions: Both the assignee (the buyer of the assignment) and the assignor (the original buyer) might have specific conditions, such as arranging financing and undergoing legal review, outlined in the conditionally accepted offer. This stage can take longer compared to a standard resale real estate transaction.
7. Vendor Approval: Before finalizing the assignment, the builder's approval is sought for the new assignee. Typically, this involves submitting proof of financing, often in the form of a mortgage letter.
8. Remaining Deposit: A second deposit is required from the assignee, which usually amounts to the initial purchase amount that the assignor paid to the builder, often around 15%. This deposit is then released to the assignor.
9. Completion: The assignor, who sold their assignment rights, will generally receive any profits stemming from the difference between the assignment sale price and the original condo purchase price. These profits are typically distributed upon the closing of the unit.
Given the complexity of assignment sales compared to other real estate transactions, it's advisable to work alongside a knowledgeable agent and lawyer to navigate the process smoothly.
